Open AccessFiscal Multiplier Determinants in the CESEE Region
Author(s) -
Milan Deskar-Škrbić,
Hrvoje Šimović,
Antonija Buljan
Publication year - 2019
Publication title -
journal of management and financial sciences
Language(s) - English
Resource type - Journals
eISSN - 2657-5612
pISSN - 1899-8968
DOI - 10.33119/jmfs.2017.29.1
Subject(s) - economics , fiscal multiplier , openness to experience , fiscal policy , business cycle , monetary economics , macroeconomics , debt , government spending , market economy , psychology , social psychology , welfare
In this paper we use the panel VAR model with exogenous variables to analyse the effects of various structural characteristics of the economies on the effectiveness of government consumption in the Central Eastern and Southeastern European region (CESEE). More precisely, we analyse the effects of government consumption on economic growth in this region, controlling for the effects of the size of the economy, level of public debt, level of tax burden, openness of the economy, rigidity of the labour market, monetary regime and the phase of the business cycle. Our results indicate that these characteristics have a significant impact on the effectiveness of fiscal policy (in terms of the size of the fiscal multiplier). Also, these effects are in line with the theoretical assumptions as the recessionary phase of the cycle, size of the economy, rigidity of the labour market and the fixed exchange rate regime increase the average size of fiscal multipliers while tax burden, indebtedness and openness of the economies reduce the size of the fiscal multiplier, when compared to the base model.