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Impact of fiscal measures in response to the COVID-19 pandemic on small-open economies: lessons from Slovenia

Author

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  • Arigoni, Filippo
  • Breznikar, Miha
  • Lenarčič, Črt
  • Maletič, Matjaž

Abstract

We estimate the impact of the fiscal expansion due to the COVID-19 outbreak on the Slovene economy using two models. First, we simulate fiscal shocks in 3-scenarios in a calibrated large-scale DSGE model. Second, we employ a small-scale VAR model to check the robustness of the theoretical results. The findings suggest a significant response of GDP, private consumption, and imports to fiscal shocks. In particular, the outcomes highlight that compared to other unanticipated fiscal developments a government consumption shock explains the lion's share of domestic fluctuations. The main transmission channel is high complementarity between private and government consumption.

Suggested Citation

  • Arigoni, Filippo & Breznikar, Miha & Lenarčič, Črt & Maletič, Matjaž, 2020. "Impact of fiscal measures in response to the COVID-19 pandemic on small-open economies: lessons from Slovenia," MPRA Paper 104474, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104474
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    References listed on IDEAS

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    Cited by:

    1. Garcia, Pablo & Jacquinot, Pascal & Lenarčič, Črt & Lozej, Matija & Mavromatis, Kostas, 2023. "Global models for a global pandemic: The impact of COVID-19 on small euro area economies," Journal of Macroeconomics, Elsevier, vol. 77(C).
    2. Lorena Skufi & Adam Geršl, 2023. "Using Macrofinancial Models to Simulate Macroeconomic Developments During the COVID-19 Pandemic: The Case of Albania," Eastern European Economics, Taylor & Francis Journals, vol. 61(5), pages 517-553, September.
    3. Damjanović, Milan & Lenarčič, Črt, 2023. "Constructing a house price misalignment indicator: revisited and revamped," MPRA Paper 118489, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal shocks; Fiscal multipliers; DSGE model; VAR model.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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