‘Through a glass darkly’: Fiscal expansion and macro-economic developments, 2001–2006

Cecília Hornok, Zoltán Jakab and Gabor Kiss

MNB Bulletin (discontinued), 2008, vol. 3, issue 1, 6-13

Abstract: For several years after 2001, fiscal policy in Hungary was characterised by expansion, boosting the economy through several channels. As a consequence, while the global economy slowed down temporarily between 2001 and 2003, economic growth remained stable at high levels in Hungary. Due to fiscal expansion, the picture formed of potential growth in Hungary was artificially biased in an upward direction. The growth rate of Hungary’s GDP would have been 1 per cent lower than it actually was between 2001 and 2003, and then between 2004 and 2006 it would have been similar to what was actually recorded. Accordingly, the business cycle would have moved more in conjunction with its European counterpart. The extent of slowdown in future potential growth is likely to have been smaller though.

Keywords: potential GDP; output gap; fiscal expansion. (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2008
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