CNB seminar "Estimates of the Fiscal Multipliers for the Czech Republic"
Prague, 1 October 2025
Jan Čapek (Masaryk University and SYRI)
Jan Čapek is an Associate Professor in the Department of Economics at the Faculty of Economics and Administration, Masaryk University in Brno, and Senior Researcher at The National Institute for Research on Socioeconomic Impacts of Diseases and Systemic Risks (SYRI). He earned his Ph.D. in Economics from Masaryk University in 2012 and completed his habilitation in 2022 with a thesis titled “Three Essays in Macroeconomics: A Comprehensive Framework in Macroeconomic Policy Evaluation.” His research focuses on DSGE models, macroeconomic forecasting, structural economic changes, and policy evaluation, particularly in the areas of fiscal and monetary policy.
Estimates of the Fiscal Multipliers for the Czech Republic (abstract)
This study estimates government spending fiscal multipliers for the Czech Republic over the period 1999 Q1 – 2024 Q3 using a wide range of VAR, FAVAR, and local projection models. Excluding the Covid-19 period, the average one-year multiplier reaches 0.61 and the two-year multiplier 0.89. However, when the Covid-19 pandemic period is included, the multipliers rise to 0.98 (one-year) and 1.26 (two-year). This indicates significantly higher effectiveness of government spending during this crisis, underlining the importance of active economic policy in times of extraordinary shocks. State-dependent estimates show a pronounced cyclical variation: in expansion, the annual multiplier in the baseline scenario is 0.31, while in recession it is 0.78; the two-year multiplier then reaches 0.82 vs. 1.73. The results are sensitive to (i) the granularity of expenditure and tax composition, (ii) the construction of the slack variable, (iii) the identification scheme, (iv) the choice of price deflator, and to some extent also (v) the specific econometric specification. Despite substantial uncertainty, the findings confirm that government spending in the Czech economy generally has a positive and cyclically asymmetric effect, which is stronger during periods of economic downturn and exceptional crises.