EconPapers    
Economics at your fingertips  
 

Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries

Rilind Kabashi

No 2017-03, Working Papers from National Bank of the Republic of North Macedonia

Abstract: This study empirically investigates the short- to medium-term effects of fiscal policy on output and other macroeconomic variables in European Union countries between 1995 and 2012, with particular reference to transition countries. It applies Panel Vector Auto Regression with recursive identification of government spending shocks as the most appropriate method for the aim of the study and the sample used. The main results indicate that expansionary spending shocks have a positive, but a relatively low effect on output, with the fiscal multiplier around one in the year of the shock and the following year, and lower thereinafter. There are indications that this result is driven by the recent crisis, as multipliers are considerably lower in the pre-crisis period. Effects of fiscal policy are strongly dependent on country structural characteristics. Fiscal multipliers are higher in new European Union member states, in countries with low public debt and low trade openness. Further, spending shocks are followed by rising debt levels in old member states, which could be related well to the recent European debt crisis. Finally, the analysis of the transmission mechanism of fiscal policy yields results that are consistent with both extended Real Business Cycle models and extended New Keynesian models.

Keywords: fiscal policy; panel VAR; European Union; transition countries (search for similar items in EconPapers)
JEL-codes: C33 E62 H30 (search for similar items in EconPapers)
Pages: 28
Date: 2017
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.nbrm.mk/content/Working%20papers/Macroe ... sition_countries.pdf First version, 2017 (application/pdf)

Related works:
Journal Article: Macroeconomic effects of fiscal policy in the European Union, with particular reference to transition countries (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mae:wpaper:2017-03

Access Statistics for this paper

More papers in Working Papers from National Bank of the Republic of North Macedonia Contact information at EDIRC.
Bibliographic data for series maintained by Jovica Mitik ().

 
Page updated 2023-06-05
Handle: RePEc:mae:wpaper:2017-03