Conference Paper (Czech conference)
serial: Mathematical Methods in Economics 2010 , Eds: Houda Michal, Friebelova Jana
action: Mathematical Methods in Economics, (Ceske Budejovice, CZ, 08.09.2010-10.09.2010)
project(s): GD402/09/H045, GA ČR, GA402/09/0965, GA ČR
keywords: fiscal policy, fiscal multiplier
In this paper, we provide the estimates of the fiscal multiplier in the Czech economy, based on the methodology of the fiscal VAR. The basic idea, adding fiscal variables into the macroeconomic VAR model, follows Blanchard and Perotti (2002). For estimation of our model, we utilize the dataset with quarterly data on a sample from the first quarter of 1998 to the second quarter of 2009. Our main results are as follows. Firstly, government expenditures have a positive and significant impact on the GDP. By contrast, a response of GDP on a shock to government revenues is slightly negative and in most specifications not significant. Secondly, these results are robust to various sensitivity checks. Consequently, the restoration of sustainable fiscal policy should focus rather on the revenues side than in the government expenditures, since a significant cut in government spending would probably have slowed down economic growth.