The smoothing impact of fiscal stabilizers (proxied by government expenditures) on business cycle volatility is studied for a panel of European Union (EU) countries in the period 1970-1999. Special emphasis is put on the investigation of possible nonlinearities in the relationship between Gross...

We study the smoothing impact of fiscal stabilizers (proxied by government expenditures or revenues) on business cycle volatility for a panel of EU countries in the period 1970-99. The results show that the business cycle volatility smoothing effect of fiscal stabilizers may revert at high...

The tax smoothing hypothesis (TSH) is tested for the New Member States of the European Union. Our results show that the TSH holds for five countries, the introduction of the Maastricht 3%-deficit rule, however, had very little effect with regard to the validity of the TSH.