Heterogeneity of households and the effects of fiscal policy in CEE countries

Piotr Krajewski
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Piotr Krajewski: Institute of Economics, Faculty of Economics and Sociology, University of Lodz, Poland

No 2/2016, Lodz Economics Working Papers from University of Lodz, Faculty of Economics and Sociology

Abstract: We analyse the effects of fiscal policy in non-EMU Central and Eastern European counties. The analysis is based on 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-Ricardians has significant impact on fiscal multipliers. The government spending multiplier reaches 3 in the country with highest share of non- Ricardian households, whereas in the country with lowest share of non-Ricardians is lower than one. Also effects of government spending shocks on consumption are very sensitive to the share of households with liquidity constraints.

Keywords: fiscal policy; government spending; new Keynesian model; heterogeneity of households; non-Ricardian households. (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-eec, nep-ger, nep-mac and nep-tra
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