Focus on European Economic Integration Q2/11
- Juni 2011.
The Economic Transmission of Fiscal Policy Shocks from Western to Eastern Europe (PDF, 2,1 MB) Cuaresma, Eller, Mehrotra. Crespo Cuaresma, Eller, Mehrotra – Focus on European Economic Integration Q2/11 This paper studies the transmission of a foreign fiscal policy shock (assumed to be generated in Germany) to key macroeconomic variables in five Central and Eastern European economies (CEE-5). We use quarterly data from 1995 to 2009 and estimate an open economy structural vector autoregressive (SVAR) model identified by imposing reasonable restrictions on contemporaneous responses in the system. Our model is able to identify well-known episodes of fiscal policy action in the countries under review. We find that a foreign fiscal shock affects domestic fiscal variables and vice versa, which highlights the importance of cross-country coordination of fiscal policies within the EU. All the CEE-5 respond to a fiscal expansion abroad with fiscal easing at home (more strongly on the public spending than on the revenue side). We find negative cross-border fiscal spillovers for Slovenia, the Czech Republic and Slovakia, while in Poland and Hungary, output reacts positively to a fiscal expansion in Germany. For domestic fiscal shocks, which we also explore, we find Keynesian responses in Hungary and Slovakia, while non-Keynesian responses are present in the Czech Republic, Poland and Slovenia. Our results imply that “one-size-fits-all” policy recommendations would be too simplistic for the CEE-5; a deeper understanding of the reasons for cross-country differences in response to fiscal shocks is required to be able to provide adequate information to policymakers in these countries. en fiscal policy, cross-border spillovers, fiscal multiplier, foreign shock, structural vector C54, E62, H2, H5, P2 30.06.2011, 00:00:00
CESEE-Related Abstracts from Other OeNB Publications (PDF, 1,5 MB) Gardó – Focus on European Economic Integration Q2/11 en 30.06.2011, 00:00:00
68th East Jour Fixe Limited Fiscal Space in CESEE: Needs and Options for Post-Crisis Reform (PDF, 1,9 MB) Focus on European Economic Integration Q2/11 en 30.06.2011, 00:00:00
Presentation at the OeNB by Éva Katalin Polgár (ECB): Are Policy Measures Effective in Controlling Credit Growth in Emerging Europe? (PDF, 2,1 MB) Focus on European Economic Integration Q2/11 en 30.06.2011, 00:00:00
Statistical Annex (PDF, 1,6 MB) en 30.06.2011, 00:00:00
Notes (PDF, 1,6 MB) en 30.06.2011, 00:00:00