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Fiscal Responsibility and Debt Sustainability. Preparedness for External Shock: The Case of the Czech Republic and Slovakia

Author

Listed:
  • Martin Zeman

    (University of Economics, Prague)

  • Jan Kozak

    (University of Economics, Prague)

  • Stepan Pekarek

    (University of Economics, Prague)

  • Jan Vondracek

    (University of Economics, Prague)

  • Miroslav Sevcik

    (University of Economics, Prague)

Abstract

The article compares the development of the main government debt indicators in the Czech Republic and in Slovakia between 2014 and 2019 while evaluating their respective positions in at the beginning of the crisis caused by the spread of Covid-19 in early 2020. After a review of the characteristics and the nature of the external shock in comparison to previous crisis which took place from 2008 to 2009, the article discusses the preparedness of both economies for negative external shocks, primarily from the public finance perspective. The authors conclude that the Czech fiscal position is one of slightly higher overall preparedness to overcome possible economic problems than that of its Slovak counterpart. However, further assessment of the underlying tensions within Czech government deficit structure, past procyclical economic policy behavior and recent policy actions lessen the superiority of the Czech fiscal position and render both economies equally exposed to the negative effects of the coming crisis. In the current environment of uncertainity, it is difficult to establish a conclusive projection but the authors highlight the key risk areas for the medium-term horizon in the concluding discussion of the paper.Acknowledgment: The publication of this article was supported by the University of Economics, Prague research grant IGA no. IG504020

Suggested Citation

  • Martin Zeman & Jan Kozak & Stepan Pekarek & Jan Vondracek & Miroslav Sevcik, 2020. "Fiscal Responsibility and Debt Sustainability. Preparedness for External Shock: The Case of the Czech Republic and Slovakia," Proceedings of Economics and Finance Conferences 10913141, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:10913141
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    References listed on IDEAS

    as
    1. Miroslav Sevcik & Adela Zubikova & Josef Klement & Jan Kozak & Martin Zeman & Pavel Smolak & Tomas Lejsek & Lubor Simunek & Kristyna Vesela, 2020. "Economic Policy Recommendations During the Coronavirus Pandemic in the Czech Republic," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 8(1), pages 155-175, May.
    2. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Covid-19; Fiscal Policy; General Government; Debt Management; Business Cycle;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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