Estimation of the Mechanisms for Automatic Fiscal Stabilization. The Romanian Case

Abstract

The set of fiscal rules within the Euro area are based on the functionality of the automatic stabilizers as a main instrument of the fiscal stabilization. This non-discretionary approach should guarantee that the evolution of the current budget deficit is anti-cyclic and thus it should contribute to the economic stability. According to the Convergence Program submitted to the European Commission, Romania proposes to access the Euro area in 2015. For this reason, the assessment of the automatic fiscal stabilization mechanism for the Romanian economy is essential, under the terms in which the adjustment mechanisms (possibly alternative) – at the markets’ level are poor. This study makes an estimation for the extent of the automatic stabilizers for Romania, with the purpose of assessing the macroeconomic stabilizing role of the Romanian fiscal policy during the period 2000-2010, by using the official methods of the International Monetary Fund and of the European Commission.

Keywords

• fiscal policy
• automatic stabilizers
• rules versus discretion