German Fiscal Austerity Effects on Investments and Exports in the Central and Eastern European Countries

Abstract

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“…For the CEE countries, Crespo Cuaresma et al [2011] obtain that the budget deficit in Germany has an expansionary effect on output in Hungary and Poland, while being restrictionary for the Czech Republic, Slovakia and Slovenia. However, Shevchuk and Kopych [2016] find that fiscal austerity in Germany contributes to output growth in seven CEE countries. Both studies do not answer the question of what are the mechanisms of cross-border fiscal spillovers in general and reasons for likely cross-country differences in response to foreign fiscal shocks in particular.…”