THE FISCAL CONSOLIDATION CONSEQUENCES ON ECONOMIC GROWTH IN ROMANIA

Bogdan Dumitrescu

Journal for Economic Forecasting, 2015, issue 3, 136-151

Abstract: In the context of the economic and financial crisis the modification of the fiscal policy coordinates was seen either as a way to alleviate the impact of the crisis on the economic growth or as a necessity in order to reinsure fiscal sustainability. In both cases a correct estimation of the fiscal multipliers is crucial. This paper estimates the level of the fiscal multipliers for Romania in order to assess the impact on the economic growth generated by the fiscal consolidation process initiated in 2010. The results show that the levels of the fiscal multipliers are relatively low. However, there is an important difference between the values of the fiscal multipliers in the boom times compared to the periods when the economy operates below its potential and the empirical results showed a level of about 0.1 for the budgetary expenditure over the period 2000Q1- 2008Q2 and around 0.4-0.5 during 2008Q3-2014Q1, while the revenue multiplier was around 0.1 in both periods.

Keywords: fiscal multipliers; structural VAR; fiscal consolidation; economic cycle (search for similar items in EconPapers)
JEL-codes: E62 F43 H21 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2015:i:3:p:136-151

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