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Ukraine's fiscal adjustment in European context

T. Bogdan

Economy and Forecasting, 2016, issue 4, 7-24

Abstract: This paper examines fiscal stance in the EU as controversial issues for economic research and policy debates; it also investigates the underlying fiscal and debt positions of Ukraine's government as a legacy of global crisis and the outcome of country specific economic problems. Author calculates the cyclically adjusted fiscal balance of Ukraine and provides evidence of a highly pro-cyclical and restrictive fiscal policy since 2014. Ukraine is proved to be a "champion" in recent international rank of countries with largest cyclically adjusted primary surpluses. Author assesses Ukraine's fiscal consolidation package from the point of view of its compatibility with economic growth and social equity targets and distinguishes beneficial and harmful for economic growth fiscal policy instruments in Ukraine. The paper highlights factors affecting the size of fiscal multipliers and computes the short-term and medium-term multipliers in Ukraine, which proved to be 0.4 and 1.3, respectively. Next, the impact of fiscal adjustment on output has been estimated to be as high as a 8.9% fall in real GDP over the medium-term. On the basis of qualitative conclusions and quantitative estimates thereby derived, author draws policy recommendations which cover a mix of fiscal consolidation instruments, a pace of fiscal adjustment, the tools for government debt management, as well as a design and enforcement of the fiscal rules.

Date: 2016
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Handle: RePEc:eip:journl:y:2016:i:4:p:7-24