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Myths and Maths: Macroeconomic Effects of Fiscal Adjustments in Hungary

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Author Info

  • Ágnes Horváth

    ()
    (Magyar Nemzeti Bank)

  • Zoltán M. Jakab

    ()
    (Magyar Nemzeti Bank)

  • Gábor P. Kiss

    ()
    (Magyar Nemzeti Bank)

  • Balázs Párkányi

    ()
    (Magyar Nemzeti Bank)

Abstract

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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Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2006/52.

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Length: 61 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mnb:opaper:2006/52

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Related research

Keywords: Keynesian; non-Keynesian effects; expansionary fiscal adjustment; Monetary policy reactions; Model simulations.;

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Cited by:
  1. Jesús Crespo Cuaresma & Markus Eller & Aaron Mehrotra, 2011. "The Economic Transmission of Fiscal Policy Shocks from Western to Eastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2.
  2. Gábor Pellényi, 2012. "The Sectoral Effects of Monetary Policy in Hungary: A Structural Factor Analysis," MNB Working Papers 2012/1, Magyar Nemzeti Bank (the central bank of Hungary).
  3. Ágnes Orosz, 2013. "Large-Scale Transformation of Socio-Economic Institutions - Comparative Case Studies on CEECs. Background Paper 2: Comparative Country Study - Hungary," WWWforEurope Working Papers series 18, WWWforEurope.
  4. Gábor P. Kiss, 2007. "Pain or Gain? Short-term Budgetary Effects of Surprise Inflation - the Case of Hungary," MNB Occasional Papers 2007/61, Magyar Nemzeti Bank (the central bank of Hungary).
  5. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2011. "Panel data evidence on non-Keynesian efects of fiscal policy in the EU New Member," MPRA Paper 32696, University Library of Munich, Germany.
  6. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2013. "Panel data evidence on effects of fiscal impulses in the EU New Member States," MPRA Paper 48243, University Library of Munich, Germany.

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