The Fiscal Placebo

Hana Lipovská ()
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Hana Lipovská: Masaryk University, Faculty of Economics and Administration, Department of Economics of Economics, Prague

ACTA VSFS, 2015, vol. 9, issue 2, 136-154

Abstract: Discretionary fiscal policy is associated with long time lags that, according to many authors, prevent its efficient implementation during economic crises. Implementation lags, i.e. the lag between the day on which economic policymakers decide on a specific form of response to the actual economic situation and the day on which a relevant law takes effect, have the signalling function. In this article we analyse the implementation lag in the discretionary fiscal policy in the Czech Republic during economic crises. First, we present arguments according to which time lags are pro-cyclic and thus they prevent implementation of the discretionary fiscal policy. We will verify the grounds behind the arguments concerning the Czech economy. Furthermore, we focus on the reasons due to which the implementation lag may be neutral as concerns the economic cycle. In the third part, we present our own concept of fiscal placebo pursuant to which the implementation lag may have negative, neutral, or even positive impacts on the actual economy. We have demonstrated, that anti-crisis laws have taken effect, with a single exception, always only after the end of the recession to which they were supposed to react and the volume of the funds used by the government to achieve stabilization is relatively low.

Keywords: Czech economic policy; fiscal discretion; fiscal placebo; Great Recession; implementation lag; signalizing function (search for similar items in EconPapers)
JEL-codes: E62 H30 H70 K40 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:prf:journl:v:9:y:2015:i:2:p:136-154

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