The aim of this study is to analyze fiscal policy in the euro area under the current institutional architecture of the Eurozone. In the first part, it will be investigated to what extent automatic stabilizers have provided macroeconomic stabilization in the last years and if they have been restricted by the Stability and Growth Pact. The second part analyzes automatic stabilizers in the steady state, i.e. when euro area member states have achieved their medium term objectives. We compare the effectiveness of automatic stabilizers in Europe and the US, decompose overall automatic stabilization into different components of the tax and transfer system and show their budgetary effects.

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