On the Logic of Automatic Fiscal Stabilizer

Summary

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The study has as a background objective the design of a logical base of the non-discretionary public policy. In this end, the authors introduce some definition distinctions between the direct versus indirect and between explicit versus implicit public policies of adjustment. On this base, the concept of automatic fiscal stabilizer is offered, from a logical point of view, by identifying the necessary and sufficient predicates of it. The next step was to describe the abstract mechanism of action of the automatic fiscal stabilizer, using the specific concepts of action rate and action base (which are introduced by the paper). The general role (and functions) as well as the logical definition of the automatic fiscal stabilizer express also some results that study intend to propose to the scientific community.

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On the Logic of Automatic Fiscal Stabilizer

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1. Introduction

A direct public policy (PP) is that PP which determines the variation of the target variable directly, without the mediation of a command variable. For instance, the administrative setting of the price for a good or service (the reason for such intervention is of no interest here) means simply to modify that price1.

An indirect PP is that PP which determines the variation of the target variable indirectly, by mediation of a command variable. Some methodological clarifications are needed here: 1) we presume to have (accept) the theory which determines the causal relation between the variation of the command variable and the variation of the target variable; 2) the channel (mechanism) of transmitting the influence of the command variable on to the target variable is known, observable, accessible and controllable (under all required aspects: amplitude of shock transmission, the different lags or leads etc.). For instance, production of the tax base variation (also see the Laffer curve) or of the interest rate variation using the variation of the monetary policy interest rate could initiate such transmission mechanisms.

An explicit PP is that PP which produces the variation of the target variable by ...

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(Copyright 2011)
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