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Assessing the Connection between Fiscal Policy and Private Consumption in Four Euro Area Candidates

Author

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  • Leonte Alexandru

    (The Academy of Economic Studies, Bucharest)

Abstract

The study of private sector response to fiscal policy decisions is a topic of macroeconomic research which has drawn much attention throughout the years. This paper studies the connection between budget deficits and private spending in Romania and other three euro area candidate countries, Hungary, Poland and the Czech Republic. Our results show a rather weak connection between the dynamic of the fiscal policy variables (government spending or fiscal deficit) and the dynamic of private consumption for all countries except Poland, which indicates that a fiscal stimulus has a good chance of being effective in this country. Also, we found that the dynamic of public debt is significantly and positively related to private consumption for all countries except Romania.

Suggested Citation

  • Leonte Alexandru, 2010. "Assessing the Connection between Fiscal Policy and Private Consumption in Four Euro Area Candidates," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 424-427, October.
    • Handle: RePEc:ovi:oviste:v:10:y:2010:i:2:p:424-427
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    More about this item

    Keywords

    fiscal stimulus; Ricardian behavior; Keynesian behavior; fiscal multiplier; economic crisis;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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