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Vliv makroekonomických šoků na dynamiku vládního dluhu: jak robustní je fiskální pozice České republiky?
[The Impact of Macroeconomic Shocks on the Government Debt Dynamics: How Robust is the Fiscal Stance of the Czech Republic?]

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  • Melecky, Ales
  • Melecky, Martin

Abstract

This paper analyzes the effects of macroeconomic shocks on the government debt dynamics in an open economy using the analytical framework of Favero and Giavazzi (2007) extended to an open economy. Applying this modeling approach to the data for the Czech Republic, the authors derive some implications for fiscal policy. The modeling framework includes structural vector autoregression (SVAR) model, estimated using short-term identification restrictions, and non-linear specification of the government debt dynamics. The main variables of the analyzed system are GDP, inflation, the effective interest rate on government debt, government revenues and expenditures, the exchange rate and government debt. The estimation is carried out using the Bayesian approach. The results suggest that allowing for a non-linear dynamics in the government debt to GDP ratio could imply stronger persistence and higher volatility in the responses of government indebtedness to macroeconomic shocks. The fiscal stance of the Czech Republic seems to be most vulnerable to unexpected depreciation of the local currency, discretionary pro-cyclical increases in government expenditures, and deflationary shocks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39761.

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Date of creation: Jun 2012
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Handle: RePEc:pra:mprapa:39761

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Keywords: Government Debt; Non-linear Dynamics; Macroeconomic Shocks; Open Economy; Structural Vector Autoregression Model; Bayesian Estimation; Czech Republic;

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References

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  1. António Afonso & Ricardo M. Sousa, 2008. "The Macroeconomic Effects of Fiscal Policy," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2008/56, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. repec:taf:applec:44:y:2012:i:34:p:4439-4454 is not listed on IDEAS
  3. Carlo Favero & Francesco Giavazzi, 2007. "Debt and the effects of fiscal policy," Working Papers 317, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Melecky, Ales & Skutova, Marketa, 2011. "Fiskální pravidla v zemích Visegrádské čtyřky
    [Fiscal Rules in the Visegrad Countries]
    ," MPRA Paper 34028, University Library of Munich, Germany.
  5. Dybczak, Kamil & Melecky, Martin, 2011. "Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis," MPRA Paper 33684, University Library of Munich, Germany.
  6. Emilia Câmpeanu & Andreea Stoian, 2010. "Fiscal Policy Reaction in the Short Term for Assessing Fiscal Sustainability in the Long Runin Central and Eastern European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 60(6), pages 501-518, December.
  7. Michal Franta & Jan Libich & Petr Stehlik, 2012. "Tracking Monetary-Fiscal Interactions Across Time and Space," Working Papers, Czech National Bank, Research Department 2012/06, Czech National Bank, Research Department.
  8. Stephen Snudden & Vladimir Klyuev, 2011. "Effects of Fiscal Consolidation in the Czech Republic," IMF Working Papers 11/65, International Monetary Fund.
  9. Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," CEP Discussion Papers dp1016, Centre for Economic Performance, LSE.
  10. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 76(235), pages 321-42, December.
  11. Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2008. "Empirical Properties Of Closed- And Open-Economy Dsge Models Of The Euro Area," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 12(S1), pages 2-19, April.
  12. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198290858, October.
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