Ágnes Horváth () (Magyar Nemzeti Bank) Zoltán M. Jakab () (Magyar Nemzeti Bank) Gábor P. Kiss () (Magyar Nemzeti Bank) Balázs Párkányi () (Magyar Nemzeti Bank)
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In this paper we investigate the possible effects of fiscal tightening in Hungary from two perspectives. First, simulations in an estimated neo-Keynesian model are used to characterise the effects of different scenarios for fiscal consolidations. We show that the composition of fiscal shocks is important for both the economic outcome and monetary policy. These simulations suggest a modest output cost of fiscal consolidation. Then we take a closer look at the non-Keynesian effects and their relevance for Hungary in a qualitative way. In our review of non-Keynesian channels of fiscal adjustments we conclude that expansionary effects are likely to become evident only in the medium or long run, rather than immediately after measures are taken.
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Paper provided by Magyar Nemzeti Bank (The Central Bank of Hungary) in its series MNB Occasional Papers with number
2006/52.
Find related papers by JEL classification: E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy 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 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 E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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