EFFECTS OF FISCAL POLICY SHOCKS IN CE3 COUNTRIES (TVAR APPROACH)
European Union member countries experienced a decrease in the macroeconomic performance during the early stages of the economic and debt crisis. Signiﬁcant deterioration in the ﬁscal stance as one of the primary implications of the economic recession revealed questions associated with ﬁscal sustainability in terms of threshold levels of ﬁscal deﬁcit and sovereign debt that individual countries can sustain over longer period of time (Wöhlbier, Astarita, & Mourre, 2014).
Jméno a příjmení autora:
Rajmund Mirdala, Martin Kameník
Fiscal policy, threshold VAR, structural shocks, ﬁscal multipliers, generalized impulse-response function
The real output deterioration, high ﬁscal deﬁcits and increased sovereign debt burden represents key phenomena that affected the maneuverability of ﬁscal authorities in the early crisis years.…více
The real output deterioration, high ﬁscal deﬁcits and increased sovereign debt burden represents key phenomena that affected the maneuverability of ﬁscal authorities in the early crisis years. Controversy between ﬁscal sustainability and ﬁscally driven economic recovery fueled a large number of academic and policy discussions about the appropriate response of governments to the crisis challenges. Empirical literature provides mixed evidence about the effects of ﬁscal policy adjustments on the macroeconomic performance. Moreover, pro-cyclical patterns in ﬁscal policies of many countries during the pre-crisis period did not reveal clear lessons learned that would be beneﬁcial for ﬁscal authorities during the crisis years.
In the paper we examine effects of the ﬁscal policy shocks in CE3 (the Slovak Republic, the Czech Republic and Hungary) within different stages of the business cycle by employing threshold vector autoregression (TVAR) model. We calculate ﬁscal multipliers and generalized impulseresponse functions to assess the responsiveness of the real output to the ﬁscal policy adjustments. The main objective is to determine whether effects of the ﬁscal policy shocks differ during expansion and recession. Our results indicate that the size of ﬁscal multipliers and responsiveness of the real output are generally higher for spending ﬁscal shocks while effects of revenue ﬁscal shocks are much less dynamic in all three countries. While the effects of the ﬁscal spending shocks are more dynamic during recession in the Czech Republic and Hungary, ﬁscal spending multipliers in the Slovak Republic are generally high during the recession as well though higher during expansion. Moreover, differences in the responsiveness of the real output are slightly higher in case of the expenditure based ﬁscal adjustments in all three countries (in terms of both, regimes and subperiods).