Hooverism, hyperstabilisation or halfway-house? describing fiscal policy in Estonia 1996-2003
AbstractThis paper develops a simple framework for describing fiscal policy where policymakers attempt to minimise deviations in output and budget balance from target values. Optimal policy is given by minimising a quadratic loss function subject to a linear structure of the economy. This policy can be viewed as weighted average of two polar cases - the case where the budget deficit adjusts to eliminate any deviations from potential output (hyperstabilisation), and the case where taxes and spending are determined exclusively by some budgetary goal (hooverism). We find some evidence of stabilisation for Poland, Latvia and Estonia. There is no evidence for the Czech Republic, Lithuania, Slovakia and Slovenia, suggesting that fiscal policy was being used for other objectives. The best fit is for Estonia, suggesting that a strict fiscal policy environment may not be incompatible with stabilising fiscal policy.
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Bibliographic InfoPaper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2004-04.
Length: 16 pages
Date of creation: 10 Oct 2004
Date of revision: 10 Oct 2004
Publication status: published
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-MAC-2005-08-13 (Macroeconomics)
- NEP-TRA-2005-08-13 (Transition Economics)
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