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Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis

Author

Listed:
  • Dybczak, Kamil
  • Melecky, Martin
Abstract
The recent global financial crisis has had a diverse effect on countries’ fiscal stance, especially throughout the EU. This paper examines the impact of macroeconomic shocks, including those to government revenues and expenditures, on EU countries’ fiscal stance, on aggregate, and within the EU’s sub-regions as defined by the length of countries’ membership in the EU and their level of indebtedness. The fiscal stance is measured by means of the government deficit, and the impact of macroeconomic shocks is examined using impulse responses from a structural vector autoregression (SVAR) model estimated on annual panel data. The analyzed system of macroeconomic variables includes, government revenues and expenditures, GDP growth, CPI inflation, the interest rate, the terms of trade, and the real effective exchange rate. The paper discusses the policy implications and the challenges for the EU and its sub-regions concerning the fiscal policy setting and balanced fiscal stance.

Suggested Citation

  • Dybczak, Kamil & Melecky, Martin, 2011. "Macroeconomic Shocks and the Fiscal Stance within the EU: A Panel Regression Analysis," MPRA Paper 33684, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:33684
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    File URL: https://mpra.ub.uni-muenchen.de/33684/1/MPRA_paper_33684.pdf
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    References listed on IDEAS

    as
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    7. Melecky, Martin & Raddatz, Claudio, 2011. "How do governments respond after catastrophes ? natural-disaster shocks and the fiscal stance," Policy Research Working Paper Series 5564, The World Bank.
    8. Jordi Galí & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe [‘Consumption smoothing through fiscal policy in OECD and EU countries’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(37), pages 533-572.
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    Cited by:

    1. Gerard Tchouassi & Ngwen Ngangue, 2017. "Macroeconomic and Financial Shocks in African Franc Zone: Exploring the Nexus with Vector Autoregression," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(1), pages 145-161, January.
    2. Aleš Melecký & Martin Melecký, 2012. "Vliv makroekonomických šoků na dynamiku vládního dluhu: jak robustní je fiskální pozice České republiky? [The Impact of Macroeconomic Shocks on the Government Debt Dynamics: How Robust is the Fisca," Politická ekonomie, Prague University of Economics and Business, vol. 2012(6), pages 723-742.
    3. Melecky, Ales & Melecky, Martin, 2011. "Analyzing the Impact of Macroeconomic Shocks on Public Debt Dynamics: An Application to the Czech Republic," MPRA Paper 34114, University Library of Munich, Germany.

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    More about this item

    Keywords

    Macroeconomic shocks; Fiscal Stance; European Union; Panel Data Analysis; Structural Vector Autoregression Models;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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