DP2259 Government Size and Automatic Stabilizers: International and Intranational Evidence

Author(s):	Antonio Fatás, Ilian Mihov
Publication Date:	October 1999
Keyword(s):	Automatic Stabilizers, Business Cycles, Fiscal Policy, Intranational Economics
JEL(s):	E6, F41
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=2259

This paper studies the role of automatic stabilizers using a sample of OECD countries and US states. We find that there is a strong and robust negative correlation between measures of government size and the volatility of output. This correlation is robust to the inclusion of a large set of controls as well as to alternative methods of detrending and estimation. The economic significance of this relationship is larger for the US states.