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Absorption Boom and Fiscal Stance: What Lies Ahead in Eastern Europe?

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  • Jesmin Rahman

Abstract

This paper estimates revenue and expenditure pro-cyclicality with respect to output and domestic absorption in new member states of the European Union and Croatia to assess whether these countries used the boom years of 2003-07 to create sufficient fiscal space. The current crisis has found many countries short of fiscal space. As these countries enter a different phase of capital inflows, some with large vulnerabilities and inflexible monetary policy options, the role of fiscal policy becomes more important. This paper also looks at these issues to see how fiscal policy can play a more effective role in demand management in these countries.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/97.

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Length: 31
Date of creation: 01 Apr 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/97

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Keywords: Capital inflows; Eastern Europe; Economic growth; Government expenditures; Revenues;

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References

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  1. Gábor Orbán & György Szapáry, 2004. "The Stability and Growth Pact from the Perspective Of the New Member States," William Davidson Institute Working Papers Series 2004-709, William Davidson Institute at the University of Michigan.
  2. Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
  3. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
  4. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  5. Jesmin Rahman, 2008. "Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria," IMF Working Papers 08/92, International Monetary Fund.
  6. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
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Citations

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Cited by:
  1. Islam, Roumeen, 2013. "Macroeconomic context and fiscal policy : Europe and Central Asia during 2000-2012," Policy Research Working Paper Series 6621, The World Bank.
  2. Ruben Atoyan, 2010. "Beyond the crisis: revisiting emerging Europe’s growth model," Financial Theory and Practice, Institute of Public Finance, vol. 34(4), pages 329-356.
  3. Ruben Atoyan, 2010. "Beyond the Crisis: Revisiting Emerging Europe's Growth Model," IMF Working Papers 10/92, International Monetary Fund.
  4. Francesco Spadafora & Emidio Cocozza & Andrea Colabella, 2011. "The Impact of the Global Crisis on South-Eastern Europe," IMF Working Papers 11/300, International Monetary Fund.
  5. Ruben Atoyan & Dustin Smith & Albert Jaeger, 2012. "The Pre-Crisis Capital Flow Surge to Emerging Europe: Did Countercyclical Fiscal Policy Make a Difference?," IMF Working Papers 12/222, International Monetary Fund.
  6. Ruben Atoyan & Jonathan F Manning & Jesmin Rahman, 2013. "Rebalancing: Evidence from Current Account Adjustment in Europe," IMF Working Papers 13/74, International Monetary Fund.

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