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Mandatorní výdaje a flexibilita fiskální politiky v ČR
[Mandatory Expenditure and the Flexibility of Fiscal Policy in the Czech Republic]

Author

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  • Vojtěch Roženský

Abstract

This paper deals with the development of mandatory expenditure and its effect on the flexibility of fiscal policy in the Czech Republic. Fiscal flexibility is measured by the Steuerle-Roeper index of fiscal democracy, which expresses the proportion of budgetary revenue that remains after covering mandatory expenditure, i.e. the proportion of resources available for discretionary spending. The lower the value of the index, the lower the flexibility of fiscal resources. A negative value indicates that tax revenue is not sufficient to cover mandatory expenditure and the government has no resources available for discretionary spending. The analysis of Czech fiscal data from the period between 1995 and 2009 shows, that even though the share of mandatory expenditure increases, the flexibility of fiscal policy is still substantially better compared to Germany. The results of the comparison with the United States are ambiguous, depending on methodology. Some of the possible determinants of fiscal flexibility were tested by OLS regression. The analysis confirmed a negative relation of unemployment rate with the index of fiscal democracy. Panel regression also indicates a positive effect of GDP growth and a negative effect of the debt-to-GDP ratio. The effect of population ageing was not confirmed.

Suggested Citation

  • Vojtěch Roženský, 2012. "Mandatorní výdaje a flexibilita fiskální politiky v ČR
    [Mandatory Expenditure and the Flexibility of Fiscal Policy in the Czech Republic]
    ," Politická ekonomie, University of Economics, Prague, vol. 2012(1), pages 40-57.
  • Handle: RePEc:prg:jnlpol:v:2012:y:2012:i:1:id:831:p:40-57
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    References listed on IDEAS

    as
    1. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918.
    2. Adi Brender & Allan Drazen, 2009. "Do Leaders Affect Government Spending Priorities?," NBER Working Papers 15368, National Bureau of Economic Research, Inc.
    3. Martin Feldstein, 2009. "Rethinking the Role of Fiscal Policy," American Economic Review, American Economic Association, vol. 99(2), pages 556-559, May.
    4. Alan J. Auerbach, 2003. "Fiscal Policy, Past and Present," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 75-138.
    5. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    6. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-313, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    fiscal policy; mandatory expenditure; index of fiscal democracy;

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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