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Monetary and fiscal policy transmission in Poland

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  • Haug, Alfred A.
  • Jędrzejowicz, Tomasz
  • Sznajderska, Anna

Abstract

This paper combines a fiscal structural vector-autoregression (SVAR) with a monetary SVAR for the Polish transition economy. Data are constructed from scratch in order to account for features of the transition economy and for delays in implementing legislated government spending and tax changes (fiscal foresight). For monetary policy, we find no price puzzles in the combined SVAR. Also, fiscal foresight variables have no statistically significant effects. We calculate an initial government spending multiplier of 0.70, which later peaks at 1.61 for the cumulative multiplier. This multiplier is much larger than multipliers estimated in previous studies not combining fiscal and monetary policy, where they were found to be close to zero. On the other hand, the tax multiplier is generally near zero in our study. We demonstrate the importance of combining fiscal and monetary transmission mechanisms when assessing the effects of government macroeconomic policies.

Suggested Citation

  • Haug, Alfred A. & Jędrzejowicz, Tomasz & Sznajderska, Anna, 2019. "Monetary and fiscal policy transmission in Poland," Economic Modelling, Elsevier, vol. 79(C), pages 15-27.
    • Handle: RePEc:eee:ecmode:v:79:y:2019:i:c:p:15-27
    DOI: 10.1016/j.econmod.2018.09.031
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    More about this item

    Keywords

    Structural vector autoregressions; Fiscal and monetary policy; Fiscal foresight; Transition economy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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