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Heterogeneity of Households and the Effects of Fiscal Policy in the CEE Countries

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  • Piotr Krajewski

    (University of Lodz, Institute of Economics.)

Abstract

We analyse the effects of fiscal policy in the non-EMU Central and Eastern European counties. The analysis is based on the new Keynesian model, which takes into account both optimizing Ricardian households and non-Ricardian households with liquidity constraints. Results of the study indicate that the share of non-Ricardian households has significant impact on fiscal multipliers. The government spending multiplier reaches almost 3 in the country with highest share of non-Ricardian households, whereas in the country with the lowest share of non-Ricardian households is lower than one. Also, the effects of government spending shocks on consumption are very sensitive to the share of households with liquidity constraints.

Suggested Citation

  • Piotr Krajewski, 2017. "Heterogeneity of Households and the Effects of Fiscal Policy in the CEE Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 79-93, June.
    • Handle: RePEc:rjr:romjef:v::y:2017:i:2:p:79-93
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    Cited by:

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    2. Shvets, Serhii, 2020. "The golden rule of public finance under active monetary stance: endogenous setting for a developing economy," MPRA Paper 101232, University Library of Munich, Germany.

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    More about this item

    Keywords

    fiscal multiplier; government spending; heterogeneity of households; non- Ricardian households; CEE countries;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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