Automatic Fiscal Stabilizers: Quietly Doing Their Thing

摘要

The paper presents theoretical and empirical analysis of automatic fiscal211u001estabilizers, such as the income tax and unemployment insurance benefits. Using 211u001ethe modern theory of consumption behavior, we identify several channels--211u001einsurance effects, wealth effects and liquidity constraints--through which the 211u001eoptimal reaction of household consumption plans to aggregate income shocks is 211u001etempered by the automatic fiscal stabilizers. In addition we identify a cash flow 211u001echannel for investment.