Open AccessTHE EFFECTS OF FISCAL POLICY SHOCKS ON THE BUSINESS ENVIRONMENT
Author(s) -
Gabriela Dobrotă,
Alina Daniela Vodă,
Dănuţ Dumitru Dumitraşcu
Publication year - 2021
Publication title -
journal of business economics and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.485
H-Index - 37
eISSN - 1611-1699
pISSN - 2029-4433
DOI - 10.3846/jbem.2021.15315
Subject(s) - economics , distributed lag , error correction model , fiscal policy , government spending , macroeconomics , econometrics , impulse response , shock (circulatory) , short run , convergence (economics) , autoregressive model , order (exchange) , monetary economics , cointegration , finance , mathematics , market economy , medicine , mathematical analysis , welfare
Fiscal policy influences economic conditions through public spending and taxes, generating positive or negative impulses, both on short and long term. The present research focuses on analysing the effects of the discretionary changes in the fiscal policy in seven post-communist countries of the European Union during the period 2000–2018. The autoregressive distributed lag model (ARDL) has been applied in order to obtain the convergence rates to equilibrium with a clear analysis of the periods needed to achieve the long-run fiscal sustainability. Also, the error correction vector model (VECM), which is based on the autoregressive vector (VAR) model, has been used in the second part of the analysis focusing on the Cholesky factorization of innovations. Impulse-response functions aiming to estimate the response of government expenditures to the shock produced by three macroeconomic variables have been identified.