Dealing with the COVID-19 pandemic in Slovenia: simulations with a macroeconometric model

Klaus Weyerstrass, Dmitri Blueschke, Reinhard Neck () and Miroslav Verbič

Empirica, 2023, vol. 50, issue 4, No 2, 853-881

Abstract: Abstract In this paper we analyse the effectiveness of fiscal policies with respect to macroeconomic stabilisation during the COVID-19 pandemic in the small open economy of Slovenia. Using SLOPOL11, an econometric model of the Slovenian economy, we simulate the development of the its economy during the 2020s under alternative assumptions about future pandemic-related shocks. We also determine optimal fiscal policies to combat the effects of the pandemic and to stabilise the economy under two scenarios for the future course of developments under COVID-19. Our simulations show that those public spending measures that entail both demand- and supply-side effects are more effective at stimulating real GDP and increasing employment than pure demand-side measures. Successful stabilisation policies should thus contain a supply-side component in addition to a demand-side component.

Keywords: Macroeconomics; Stabilisation policy; Fiscal policy; Policy optimisation; Tax policy; Public expenditure; Demand management; Supply-side policies; Slovenia; Public debt (search for similar items in EconPapers)
JEL-codes: E17 E37 E62 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10663-023-09591-y

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