Assessing the Impact of Fiscal Measures on the Czech Economy
We build a satellite DSGE model to investigate the transmission of fiscal policy to the real economy in the Czech Republic. Our model shares features of the Czech National Bank’s current g3 forecasting model (Andrle, Hlédik, Kameník, and Vlček, 2009), but contains a more comprehensive fiscal sector. Crucial fiscal parameters, related mainly to the specified fiscal rule, are estimated using Bayesian techniques. We calculate a set of fiscal multipliers for individual revenue and expenditure items of the government budget. We find that the largest real GDP fiscal multipliers in the first year are associated with government investment (0.4) and social security contributions paid by employers (0.3), followed by government consumption (0.2).
JEL codes: C11, E32, E62, F41
Keywords: Bayesian estimation, DSGE, fiscal policy, fiscal rule, fiscal multipliers, open economy
Issued: December 2012
Download: CNB WP No. 15/2012 (pdf, 1MB)