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Output effects of fiscal stimulus in Central and Eastern European countries

Author

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  • Jean-Louis Combes
  • Alexandru Minea
  • Lavinia Mustea
  • Thierry Yogo
Abstract
In spite of the rapidly growing research on fiscal multipliers over recent years, little evidence has been so far accumulated in developing and emerging economies. This paper investigates the nature and the size of fiscal multipliers in Central and Eastern European (CEE) countries. Unlike most of the existing literature, we draw upon a panel vector error correction model, which appropriately captures the common long-term path of CEE countries, while allowing for different short-run dynamics, in an integrated setup. Our main results show that the spending multiplier is positive, but low on average. Moreover, its sign, significance and magnitude vary across CEE. Finally, both impulse and cumulative fiscal multipliers are sensitive to a wide range of CEE characteristics, including the exchange rate regime, the level of economic development, the fiscal stance and the openness degree.

Suggested Citation

  • Jean-Louis Combes & Alexandru Minea & Lavinia Mustea & Thierry Yogo, 2016. "Output effects of fiscal stimulus in Central and Eastern European countries," Post-Communist Economies, Taylor & Francis Journals, vol. 28(1), pages 108-127, January.
    • Handle: RePEc:taf:pocoec:v:28:y:2016:i:1:p:108-127
    DOI: 10.1080/14631377.2015.1124559
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    2. Apeti, Ablam Estel & Combes, Jean-Louis & Minea, Alexandru, 2024. "Inflation targeting and fiscal policy volatility: Evidence from developing countries," Journal of International Money and Finance, Elsevier, vol. 141(C).
    3. Senekovič Marko & Kavkler Alenka & Bekő Jani, 2019. "Estimation of Government Spending Multiplier in EU Economies," Naše gospodarstvo/Our economy, Sciendo, vol. 65(1), pages 16-29, March.
    4. Nicolae-Bogdan Ianc & Camelia Turcu, 2019. "So alike, yet so different: comparing fiscal multipliers across E(M)U candidates," Working Papers 2019.03, International Network for Economic Research - INFER.
    5. Şen, Hüseyin & Kaya, Ayşe, 2021. "Output-volatility reducing effects of automatic stabilizers: Policy implications for EMU member states," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1388-1414.
    6. Rabia Rafique & Asad Nisar & Syed Sadaqat Ali Shah, 2024. "Testing the effects of fiscal policy shocks on output growth in recession and expansion: empirical evidence from developing countries," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-26, June.
    7. Ianc, Nicolae-Bogdan & Turcu, Camelia, 2020. "So alike, yet so different: Comparing fiscal multipliers across EU members and candidates," Economic Modelling, Elsevier, vol. 93(C), pages 278-298.
    8. Dudas Lavinia, 2018. "The Crisis And Fiscal Policy In Developing Countries," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 0, pages 106-112, December.
    9. Raut, Dirghau & Raju, Swati, 2019. "Size of Expenditure Multipliers for Indian States: Does the Level of Income and Public Debt Matter?," MPRA Paper 104947, University Library of Munich, Germany.
    10. Nicolae-Bogdan IANC & Adrian-Marius IONESCU, 2021. "Do Central and Eastern Countries benefit from ECB’s unconventional monetary policies?," LEO Working Papers / DR LEO 2898, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    11. Petrović, Pavle & Arsić, Milojko & Nojković, Aleksandra, 2021. "Increasing public investment can be an effective policy in bad times: Evidence from emerging EU economies," Economic Modelling, Elsevier, vol. 94(C), pages 580-597.

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    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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