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Panel data evidence on effects of fiscal impulses in the EU New Member States

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  • Borys, Paweł
  • Ciżkowicz, Piotr
  • Rzońca, Andrzej

Abstract

We identify fiscal impulses in the EU New Member States using four different methods and apply econometric panel data techniques to determine what is the response of output and its components to those impulses. We also directly test the effects of fiscal impulses on labor costs and households’ expectations. The results confirm that the composition of impulses matters for output and its components response. Notably we find evidence that investment and export growth accelerates after fiscal adjustment and decelerates after fiscal stimulus when the impulses are expenditure based. In turn, private consumption seems not to respond to fiscal impulses regardless of their size. The analysis confirms that expenditure based fiscal adjustments enhance wage moderation and thereby competitiveness of domestic enterprises, while expenditure-based fiscal stimuli weaken it. By contrast, we do not find evidence that fiscal impulses have an effect on households’ confidence.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48243.

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Date of creation: Jun 2013
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Handle: RePEc:pra:mprapa:48243

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Keywords: expansionary fiscal adjustment; contractionary fiscal stimulus; New Member States; panel data;

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