Publication detail

What the Data Say about the Effects of Fiscal Policy in the Czech Republic?

Author(s): PhDr. Jaromír Baxa Ph.D.,
Type: Article in collection
Year: 2010
Number: 0
ISSN / ISBN: 978-80-7394-218-2
Published in: Mathematical Methods in Economics 2010
Publishing place:
Keywords: Fiscal policy, fiscal multiplier, vector autoregression.
JEL codes: C32, E62
Suggested Citation: Baxa, Jaromir (2010): What the Data Say about the Effects of Fiscal Policy in the Czech Republic? In: Houda, M., Friebelova, J. (eds.) Mathematical Methods in Economics 2010, University of South Bohemia, Ceske Budejovice, p. 24-29.
Grants: 402/09/0965: New Approaches for monitoring and prediction of capital markets 402/09/H045 - Nelineární dynamika v peněžní ekonomii a financích. Teorie a empirické modely IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: In this paper, we provide the estimates of the fiscal multiplier in the Czech economy, based on the methodology of the fiscal VAR. The basic idea, adding fiscal variables into the macroeconomic VAR model, follows Blanchard and Perotti (2002). For estimation of our model, we utilize the dataset with quarterly data on a sample from the first quarter of 1998 to the second quarter of 2009. Our main results are as follows. Firstly, government expenditures have a positive and significant impact on the GDP. By contrast, a response of GDP on a shock to government revenues is slightly negative and in most specifications not significant. Secondly, these results are robust to various sensitivity checks. Consequently, the restoration of sustainable fiscal policy should focus rather on the revenues side than in the government expenditures, since a significant cut in government spending would probably have slowed down economic growth. Finally, we should note, that uncertainty connected with our results is large, namely in comparison with existing studies on the effects of monetary policy.
Downloadable: BaxaMME2010.pdf

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance