Estimating the effects of fiscal policy on GDP growth in Romania in 2015-2017 using the synthetic control method

Ioana Boiciuc and David Orțan

Post-Communist Economies, 2020, vol. 32, issue 6, 749-770

Abstract: Using the Synthetic Control Method, we estimate the effect of a large package of expansionary fiscal measures implemented in Romania from 2015 onwards. We find that it had a large and significant effect on GDP growth, ranging from 4.4 to 5.5 percentage points, accumulated over three years, with the largest effect in the third year, i.e. 2017. In this way, we try to address an important puzzle that arises in Romania from the fact that, on the one hand, standard macroeconomic models find very small (or even insignificant) fiscal multipliers, while on the other hand policy papers tend to quote the country’s expansionary fiscal policy as a factor behind the high growth rates achieved.

Date: 2020
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DOI: 10.1080/14631377.2020.1745559

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