EMPIRICAL ASSESSMENT OF STABILIZATION EFFECTS OF FISCAL POLICY IN CROATIA

Ana Grdović Gnip ()

Journal for Economic Forecasting, 2015, issue 1

Abstract: The aim of this paper is to assess the stabilization effects of fiscal policy in Croatia in a structural vector auto regression framework as proposed by Blanchard and Perotti (2002). Results prove that the fiscal transmission mechanism in Croatia works mainly in a Keynesian manner. Output reacts negatively to a tax shock and positively to government spending shock. The output multiplier is above 2 at impact and the effect is significant through the whole time span. The negative effect of the tax shock is mostly driven by indirect (not direct) taxes. The positive effect of government spending is more pronounced when government investment is considered, especially when private consumption and private investment responses are observed.

Keywords: fiscal multiplier; spending shock; tax shock; SVAR; Croatia (search for similar items in EconPapers)
JEL-codes: C32 E62 H30 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2015:i:1:p:47-69

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