Effects of Fiscal Policy in a Small Open Economy: Evidence of Croatia
AbstractIn this paper we use structural VAR model to analyze dynamic effects of fiscal shocks on economic activity in Croatia from 2000Q1-2012Q2. Due to the fact that Croatia is a small open economy we assume that shocks of foreign origination can have notable effects on its performance. Therefore, original Blanchard-Perotti (2002) model is extended by introducing variables that represent external (foreign) demand shocks. The results show that the government spending has a positive and statistically significant effect on private aggregate demand and private consumption, and net (indirect) taxes have a negative and statistically significant effect on private consumption and private AD. It should also be noted that this paper represents first attempt of estimating size of fiscal multipliers in Croatia in open economy model.
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Bibliographic InfoPaper provided by Faculty of Economics and Business, University of Zagreb in its series EFZG Working Papers Series with number 1302.
Date of creation: 07 Oct 2013
Date of revision:
fiscal policy; small open economy; Croatia; SVAR;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-MAC-2013-10-18 (Macroeconomics)
- NEP-PBE-2013-10-18 (Public Economics)
- NEP-TRA-2013-10-18 (Transition Economics)
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