The present study focuses especially on tax and expenditure measures that EU countries have introduced in response to the COVID-19 crisis. In most cases, these measures concerned the granting of technical unemployment, the postponement of tax payments, and the suspension or postponement of loan instalments or their maturity. The aim of this study is to analyse the fiscal-budgetary measures, which have been taken by almost all governments around the world, including EU countries, in an attempt to limit the negative impact of the pandemic blockade. (2020), the effectiveness of automatic fiscal stabilisers in counteracting the economic shock is less apparent during the COVID-19 crisis, especially during the lockdown phase. All these measures implemented by the European governments were necessary because according to Bouabdallah et al. Even if the important role played by the automatic fiscal stabilisers is known (Bouabdallah et al., 2020 Crespo Cuaresma, Reitschuler, & Silgoner, 2011 Dolls, Fuest, Peichl, & Wittneben, 2019 In't Veld, Larch, & Vandeweyer, 2013 Mohl, Mourre, & Stovicek, 2019), the present study analyses the effects of the discretionary measures taken by national authorities in European Union (EU) member states in cushioning the economic shock caused by the pandemic. Even if only 1 year has passed since the beginning of the outbreak in almost all countries of the world, there are an important number of papers who authors investigated the impact of COVID-19 crisis and the measures taken (Baldwin & Di Mauro, 2020 Barua, 2020 Cheng, 2020 Elgin, Basbug, & Yalaman, 2020 Siddik, 2020), but without definitive conclusions regarding the efficiency of the applied measures in short-time. the budget without automatic stabilisers, is defined. Simulations with a structural model confirm that the degree of smoothing is conditional on how the counterfactual budget, i.e. This issue is addressed by defining two types of counterfactual budgets giving rise to two different interpretations about the nature of automatic stabilisation.
This paper shows that differences in opinion mirror a deeper disagreement over how the budget would look like without automatic stabilisers. While automatic stabilisers are a fairly established concept in the fiscal policy literature, there is still no consensus about their actual nature and their effectiveness. Especially in the euro area where monetary policy is centralised and discretionary fiscal policy making is constrained by the EU fiscal rules, knowing the size and the effectiveness of automatic stabilisers is crucial.
The global financial and economic crisis has revived the debate in the academic literature and in policy circles about the size and effectiveness of automatic fiscal stabilisers.
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