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Fiscal Adjustment in Slovakia: Findings from a Medium-Scale Econometric Model

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  • Miroslav Klucik

    (Council for Budget Responsibility)

Abstract

Alternative fiscal consolidation strategies are examined in the context of a medium-scale econometric model estimated on Slovak data. The multipliers associated with adjustment on the spending side are generally larger than on the revenue side, which is not uncommon for this class of models. In particular, government spending on wages, goods and services, and investment are associated with strong real-economy consequences. On the revenue side, corporate income tax, social security contributions of employees and personal income tax increases are found to be most harmful for growth. Social contributions and personal income tax adjustments also have the most pronounced effect on employment. The policy implication is that a short-run growth-friendly consolidation strategy should avoid placing too much weight on these budgetary items.

Suggested Citation

  • Miroslav Klucik, 2015. "Fiscal Adjustment in Slovakia: Findings from a Medium-Scale Econometric Model," Working Papers Working Paper No. 1/2015, Council for Budget Responsibility.
    • Handle: RePEc:cbe:wpaper:201501
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    More about this item

    Keywords

    error correction model; fiscal rules; fiscal multipliers; neoclassical synthes;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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