The interplay between fiscal policy and public debt using a Structural Vector Autoregression Model: a comparative study of Romania and the Czech Republic

George Gruia, Ioana Duca and Anca Postole
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Ioana Duca: Titu Maiorescu University, Romania
Anca Postole: Titu Maiorescu University, Romania

Theoretical and Applied Economics, 2025, vol. XXXII, issue Special, Summer, 65-78

Abstract: This Structural Vector Autoregression (SVAR) study investigates fiscal-monetary interactions in Romania and the Czech Republic over the period 1995–2023 focusing on GDP growth, government debt, spending, interest rates, and tax revenue. In Romania, GDP growth significantly reduces debt, while spending raises interest rates, suggesting crowding-out. In the Czech Republic, growth mildly reduces debt, and spending lowers interest rates, indicating monetary accommodation. Tax revenue shocks notably stimulate Czech GDP. These findings highlight divergent fiscal dynamics in CEE, informing debt sustainability strategies. Results align with fiscal adjustment theories, offering policy insights for EU economies balancing growth and stability.

Keywords: fiscal policy; public debt; SVAR model; debt sustainability; comparative analysis. (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xxxii:y:2025:i:special-summer:p:65-78

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