Fiscal Stabilization in the United States : Lessons for Monetary Unions
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Title:
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Fiscal Stabilization in the United States : Lessons for Monetary Unions |
Author:
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Nikolov, Plamen
;
Pasimeni, Paolo
|
Organization:
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Bank of Finland
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Series:
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BoF Economics Review
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Series year:
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2019 |
Series number:
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6/2019 |
Year of publication:
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2019 |
Publication date:
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12.9.2019 |
Pages:
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26 |
Subject (yso):
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finanssipolitiikka; rahapolitiikka
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Keywords:
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rahaliitot; Yhdysvallat
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JEL:
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E63; F36; F41; F45
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Other keywords:
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Monetary Union; Macroeconomic Stabilization; Fiscal Policy; Monetary Policy
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Abstract:
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The debate about the use of fiscal instruments for macroeconomic stabilization has regained prominence in the aftermath of the Great Recession, and the experience of a monetary union equipped with fiscal shock absorbers, such as the United States, has often been a reference. This paper enhances our knowledge about the degree of macroeconomic stabilization achieved in the United States through the federal budget, providing a detailed breakdown of the different channels. In particular, we investigate the relative importance and stabilization impact of the federal system of unemployment benefits and of its extension as a response to the Great Recession. The analysis shows that in the United States, corporate income taxes collected at the federal level are the single-most efficient instrument for providing stabilization, given that even with a smaller size than other instruments they can provide important effects, mainly against common shocks. On the other hand, Social Security benefits and personal income taxes have a greater role in stabilizing asymmetric shocks. A federal system of unemployment insurance, then, can play an important stabilization role, in particular when enhanced by a discretionary program of extended benefits in the event of a large shock, like the Great Recession. |
Rights:
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https://helda.helsinki.fi/bof/copyright
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