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Effects of Fiscal Consolidation in the Czech Republic

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Abstract

This article uses the IMF’s Global Integrated Monetary and Fiscal Model (GIMF) to assess the impact of fiscal consolidation on the Czech economy. Its contribution is threefold. First, it provides estimates of dynamic fiscal multipliers for a variety of fiscal instruments (tax and expenditure), consolidation durations, assumptions about credibility, and monetary policy responses. Second, the article evaluates the impact on the economy of tightening measures envisaged in the 2011 budget. Third, the article considers alternative packages for consolidation beyond 2011 to achieve the government’s balanced budget target by 2016 and identifies which forms of adjustment are more growth-friendly.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 61 (2011)
Issue (Month): 4 (August)
Pages: 306-326

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Handle: RePEc:fau:fauart:v:61:y:2011:i:4:p:306-326

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Keywords: fiscal multipliers; fiscal consolidation; fiscal policy; general equilibrium models";

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References

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  1. Christophe Kamps, 2005. "New Estimates of Government Net Capital Stocks for 22 OECD Countries 1960-2001," Public Economics 0506015, EconWPA.
  2. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
  3. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  4. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2009. "When is the government spending multiplier large?," NBER Working Papers 15394, National Bureau of Economic Research, Inc.
  5. Taylor, John B., 2010. "Comment on: "Global effects of fiscal stimulus during the crisis" by Charles Freedman, Michael Kumhof, Douglas Laxton, Dick Muir, Susanna Mursula," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 527-530, July.
  6. Ray Barrell & Dawn Holland & Nigel Pain & Mihaly Andras Kovacs & Zoltan Jakab & Katerina Smidkova & Urmas Sepp & Uros Cufer, 2004. "An Econometric Macro-model of Transition: Policy Choices in the Pre-Accession Period," Macroeconomics 0403004, EconWPA.
  7. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  8. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  9. Douglas Laxton & Susanna Mursula & Michael Kumhof & Dirk Muir, 2010. "The Global Integrated Monetary and Fiscal Model (GIMF)," IMF Working Papers 10/34, International Monetary Fund.
  10. Freedman, Charles & Kumhof, Michael & Laxton, Douglas & Muir, Dirk & Mursula, Susanna, 2010. "Global effects of fiscal stimulus during the crisis," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 506-526, July.
  11. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
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Cited by:
  1. Jan Hagemejer & Tomasz Jedrzejowicz & Zbigniew Zolkiewski, 2011. "Fiscal tightening after the crisis. A scenario analysis for Poland," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 42(3), pages 33-66.
  2. Melecky, Ales & Melecky, Martin, 2012. "Vliv makroekonomických šoků na dynamiku vládního dluhu: jak robustní je fiskální pozice České republiky?
    [The Impact of Macroeconomic Shocks on the Government Debt Dynamics: How Robust is
    ," MPRA Paper 39761, University Library of Munich, Germany.
  3. Serbanoiu, Georgian Valentin, 2012. "Transmission of fiscal policy shocks into Romania's economy," MPRA Paper 40947, University Library of Munich, Germany.
  4. Vladimir Klyuev & Stephen Snudden, 2011. "The Effects of Fiscal Consolidation in the Czech Republic," EcoMod2011 2974, EcoMod.
  5. Robert Ambrisko & Vitezslav Augusta & Dana Hajkova & Petr Kral & Pavla Netusilova & Milan Rikovsky & Pavel Soukup, 2012. "Fiscal Discretion in the Czech Republic in 2001-2011: Has It Been Stabilizing?," Research and Policy Notes 2012/01, Czech National Bank, Research Department.
  6. Robert Ambrisko & Jan Babecky & Jakub Rysanek & Vilem Valenta, 2012. "Assessing the Impact of Fiscal Measures on the Czech Economy," Working Papers 2012/15, Czech National Bank, Research Department.
  7. Michal Franta, 2012. "Macroeconomic Effects of Fiscal Policy in the Czech Republic: Evidence Based on Various Identification Approaches in a VAR Framework," Working Papers 2012/13, Czech National Bank, Research Department.
  8. Aleš Melecký & Martin Melecký, 2012. "The Impact of Macroeconomic Shocks on the Government Debt Dynamics: How Robust is the Fiscal Stance of the Czech Republic?," Politická ekonomie, University of Economics, Prague, vol. 2012(6), pages 723-742.
  9. Jaromir Benes & Andrew Berg & Rafael A Portillo & David Vavra, 2013. "Modeling Sterilized Interventions and Balance Sheet Effects of Monetary Policy in a New-Keynesian Framework," IMF Working Papers 13/11, International Monetary Fund.
  10. Dirk Muir & Anke Weber, 2013. "Fiscal Multipliers in Bulgaria," IMF Working Papers 13/49, International Monetary Fund.

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