TY  - JOUR
AU  - Arreaza, Adriana
AU  - Sorensen, Bent E
AU  - Yosha, Oved
TI  - Consumption Smoothing through Fiscal Policy in OECD and EU Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6372
PY  - 1998
Y2  - January 1998
DO  - 10.3386/w6372
UR  - http://www.nber.org/papers/w6372
L1  - http://www.nber.org/papers/w6372.pdf
N1  - Author contact info:
Adriana Arreaza

Bent Sorensen
Department of Economics
University of Houston
3623 Cullen Blvd
Houston, TX 77204-5019
Tel: 713-743-3841
Fax: 713-743-3798
E-Mail: besorensen@uh.edu

Oved Yosha
E-Mail: yosha@post.tau.ac.il
M1  - published as Adriana Arreaza, Bent E. Sgrensen, Oved Yosha. "Consumption Smoothing through Fiscal Policy in OECD and EU Countries," in James M. Poterba and Jürgen von Hagen, editors, "Fiscal Institutions and Fiscal Performance" University of Chicago Press (1999)

AB  - We measure the amount of smoothing achieved through various components of the government deficit in EU and OECD countries.  For EU countries, at the 1-year frequency percent of shocks to GDP are smoothed via government consumption, 18 percent via transfers percent via subsidies, while taxes provide no smoothing.  The results for OECD countries are similar.  Government transfers provide more smoothing of negative than of positive shocks among EU countries.  There seems to be no trade-off between high government deficits in a country and the ability to smooth consumption.  We find that in countries where there is delegation' of power or where fiscal targets are negotiated effectively by coalition members consumption smoothing via government consumption and government transfers is considerably higher.  We interpret this finding as evidence that effective budgetary institutions can accomplish efficient consumption smoothing via government deficit spending and lower average deficits.
ER  -