 Fiscal Policy Reaction in the Short Term for Assessing Fiscal Sustainability in the Long Runin Central and Eastern European CountriesEmilia Campeanu () and Andreea Stoian Czech Journal of Economics and Finance (Finance a uver), 2010, vol. 60, issue 6, 501-518 Abstract: The aim of this paper is to analyze how the primary government balance in Central and Eastern European countries reacts in the short term, in order to assess fiscal sustainability in the long run. For the purpose of this study, a fiscal reaction function is used. Given the different orders of integration of the variables involved in the model, modified forms of the fiscal reaction function are considered. The results show that for Bulgaria, Czech Republic, Estonia, Hungary, and Lithuania fiscal policy reacts as expected – in the sense that governments have the ability to run a primary surplus – in the short term. This action makes fiscal sustainability easier to achieve in the long run. On the other hand, for Latvia, Poland, Romania, and Slovakia, sustainable fiscal policy will be more difficult to attain given the opposite response of governments to public debt shocks. In these countries, severe fiscal adjustments should be made in order to reach fiscal sustainability in the long run. Keywords: fiscal sustainability; fiscal reaction function; primary balance; public debt; budget balance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:60:y:2010:i:6:p:501-518 Access Statistics for this article More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC. |
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