Fiscal and monetary policy effects in three South Eastern European economies

Fiscal Policy Effects in Ukraine

“…Following RER depreciation, government expenditure is likely to decrease (the fraction of RER t in the variance decomposition of G t gradually increases from 6% to 17% within the sixteen-period horizon analysed), while net revenue seems to be neutral with respect to changes in the RER. Ukraine's pro-cyclical fiscal response to domestic economic activity is similar to that of Macedonia, while it is counter-cyclical in Bulgaria and Croatia (Petrevski, Bogoev & Tevdovski 2016). …”

Effects of fiscal policy Shocks in CE3 countries (TVAR Approach)

“…Borys, Ciżkowicz and Rzońca (2013);Cauresma, Eller, andMehrotra, (2011), Filipovski, Fiti, andTrenovski (2016);Boiciuc (2016);Dumitrescu (2015); Ćorić, Šimović, and Deskar-Škrbić (2015); Franta (2012); Petrevski, Bogoev, and Tevdovski (2015)), diversity in methodology, sample size as well as observed period results in mixed evidence about the size of fi scal multipliers, the real output responsiveness to the fi scal adjustments and, as a result, counter-cyclical and/or pro-cyclical patterns in the fi scal policy. Estimated threshold VAR model in our paper for CE3 countries revealed fundamentally new information about the effects of fi scal policy shocks.…”

“…The multipliers for both spending and tax shocks are typically small. Perotti (2005) implemented SVAR approach to analyze the effect of fi scal policy on output, prices and interest rates in fi ve OECD countries. The results can be summarized as follows: 1) The effects of fi scal policy on output and its components have become substantially weaker in the last 20 years; 2) The tax multipliers tend to be negative but small; 3) Once plausible values of the price elasticity of governments spending are imposed, the negative effects of government spending on prices that have been frequently estimated become positive, although usually small and not always signifi cant; 4) Government spending shocks have signifi cant effects on the real short-term interest rate, but uncertain signs; 5) Net tax shocks have very small effects on prices; 6) The U.S. is an outlier in many dimensions; U.S. responses to fi scal shocks are often not representative of the average OECD country included in this sample.…”

“…According to some authors, fi scal expansion may increase productive capacity of the country that is why positive effects of expenditure policies may be signifi cant even in good times (Ramey & Zubairy, 2014). While the size of fi scal multipliers at this stage strongly depend on the structure of government expenditures (Ćorić, Šimović, & Deskar-Škrbić, 2015), the risks of induced infl ationary pressures in the country at the peak of its performance (Petrevski, Bogoev, & Tevdovski, 2015) may easily turn into the overheating of the economy followed by an inevitable cool-down and thus a signifi cant reduction in the multiplication process. As a result, pro-cyclical patterns in the fi scal policies conducted via increase in the public expenditures in good times reduce the real output growth rates in Hungary and even deteriorates the real output in the Czech Republic.…”

“…(Barrios, Langedijk, & Penc, 2010). Elimination of signifi cant adjustments in the primary fi scal balance is the most convenient way to reduce a negative impact of fi scal policy on economic growth (Perotti, 2005). While signifi cant improvements in the primary fi scal balance during the fi scal contraction (i.e.…”