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Fiscal and Monetary Policies’ Impact on Investment in Romania

Author

Listed:
  • Avram Alexandru

    (Faculty of Economics and Business Administration, West University of Timi?oara)

  • Hete? Roxana

    (Faculty of Economics and Business Administration, West University of Timi?oara)

  • Crâ?neac Alexandru

    (Faculty of Economics and Business Administration, West University of Timi?oara)

Abstract

In this paper we intend to analyze the effects of fiscal and monetary policies on investment in Romania using a Vector Autoregression (VAR) model. We used quarterly data provided by the National Statistics Institute and Eurostat. The independent variables that we included in our study are: private consumption, government debt, gross fixed capital formation, inflation, ROBOR interest rate, government consumption, government revenue and GDP. We analyzed the influence of fiscal and monetary policies both on the short term and on the long term. Using impulse function specific to Vector Autoregressive (VAR) model, we identified the effects of fiscal and monetary policies components in Romania on the investment by Cholesky impulse functions. Our findings suggest that introduction of the flat rate tax for both corporate income and personal income had a significant positive effect on investment. The increase in VAT standard rate had a negative impact on inflation, but is positively related to investment.

Suggested Citation

  • Avram Alexandru & Hete? Roxana & Crâ?neac Alexandru, 2014. "Fiscal and Monetary Policies’ Impact on Investment in Romania," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 423-428, May.
    • Handle: RePEc:ovi:oviste:v:xiv:y:2014:i:2:p:423-428
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    More about this item

    Keywords

    fiscal policy; monetary policy; VAR; gross fixed capital formation;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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