Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173723
Authors: 
Kabashi, Rilind
Year of Publication: 
2017
Series/Report no.: 
Working Paper 3/2017
Abstract: 
This study empirically investigates the short- to medium-term effects of fiscal policy on output and other macroeconomic variables in European Union countries between 1995 and 2012, with particular reference to transition countries. It applies Panel Vector Auto Regression with recursive identification of government spending shocks as the most appropriate method for the aim of the study and the sample used. The main results indicate that expansionary spending shocks have a positive, but a relatively low effect on output, with the fiscal multiplier around one in the year of the shock and the following year, and lower thereinafter. There are indications that this result is driven by the recent crisis, as multipliers are considerably lower in the pre-crisis period. Effects of fiscal policy are strongly dependent on country structural characteristics. Fiscal multipliers are higher in new European Union member states, in countries with low public debt and low trade openness. Further, spending shocks are followed by rising debt levels in old member states, which could be related well to the recent European debt crisis. Finally, the analysis of the transmission mechanism of fiscal policy yields results that are consistent with both extended Real Business Cycle models and extended New Keynesian models.
Subjects: 
fiscal policy
panel VAR
European Union
transition countries
JEL: 
E6
C33
H30
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.