IDEAS home Printed from https://ideas.repec.org/p/cbe/wpaper/202302.html
   My bibliography  Save this paper

The impact of unexpected inflationary shock in 2022 and 2023 on the welfare of families: The case of Slovakia

Author

Listed:
  • Jana Valachyova

    (Council for Budget Responsibility)

  • Matus Senaj

    (Council for Budget Responsibility)

Abstract

We analyse the impact of an unexpected and steep increase in price level on the purchasing power of Slovak families in 2022 and 2023. This is the first and the only paper that looks at distributional impacts of an inflationary shock in Slovakia. We combine a microsimulation model SIMTASK with the data on expenditure from the Household Budget Survey to quantify the net effect of an inflationary shock together with the cushioning effects of government measures and economic adjustments in the form of inflation-induced wage growth and an additional valorisation of social benefits. We show that in 2022, the government measures were well targeted and succeeded in offsetting a significant part of a purchasing power drop for low-income families. For high-income families, economic adjustments were the crucial component offsetting a significant part of their purchasing power drop. However, the overall net effect on purchasing power was negative (6 % for an average family) and it holds true for each income decile and family type. The story is different in 2023. It turns out that despite the high inflation, the macroeconomic adjustment hand in hand with adopted government measures, including a generous price cap on energy prices, more than compensate for the effects of unexpected inflation (3 % increase for an average family). This holds true for all analysed income categories, except for the lowest income decile. When looking at family types, the best off are families without children, often consisting of pensioners.

Suggested Citation

  • Jana Valachyova & Matus Senaj, 2023. "The impact of unexpected inflationary shock in 2022 and 2023 on the welfare of families: The case of Slovakia," Working Papers Working Paper No. 2/2023, Council for Budget Responsibility.
    • Handle: RePEc:cbe:wpaper:202302
    as

    Download full text from publisher

    File URL: https://www.rrz.sk/wp-content/uploads/2023/11/2023_11_The-impact-of-unexpected-inflationary-shock.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Horváth, Michal & Senaj, Matúš & Siebertová, Zuzana & Švarda, Norbert & Valachyová, Jana, 2019. "The end of the flat tax experiment in Slovakia: An evaluation using behavioural microsimulation in a dynamic macroeconomic framework," Economic Modelling, Elsevier, vol. 80(C), pages 171-184.
    2. Zuzana Siebertova & Jana Valachyova & Norbert Svarda & Matus Senaj, 2018. "Expenditure imputation and microsimulation of VAT," Discussion Papers Discussion Paper No. 1/20, Council for Budget Responsibility.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michal Horvath & Zuzana Siebertova, 2019. "Employment Effects of Income Tax Reforms: Lessons from Slovakia," Working Papers Working Paper No. 3/2019, Council for Budget Responsibility.
    2. Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2018. "The Evaluation of Fiscal Consolidation Strategies," International Journal of Microsimulation, International Microsimulation Association, vol. 11(3), pages 39-58.
    3. Mitkova Veronika & Jánošová Miroslava, 2019. "The Tax Burden CGE Analysis for Slovakia and Slovenia," Naše gospodarstvo/Our economy, Sciendo, vol. 65(4), pages 35-46, December.

    More about this item

    Keywords

    microsimulation; inflationary shock; distributional effect; tax and transfer policy;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbe:wpaper:202302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/rrzbrsk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.