How Does Fiscal Policy Affect GDP and Inflation in Ukraine?
a National Bank of Ukraine, Kyiv, Ukraine
Abstract

In this study, we apply the Blanchard-Perotti approach to estimating the impact of fiscal policy on GDP and inflation in Ukraine. By disaggregating fiscal data, we were able to determine which items of the budget have the most influence on real GDP and inflation. Our results show that fiscal multipliers in Ukraine in absolute values are higher for budget expenditures than for taxes. In addition, both budget expenditures and taxes have a positive impact on inflation.

Publication History
Avaliable online 29 June 2018
6839
views
3310
downloads
Full Text
Citation
Cite as: Vdovychenko, A. (2018). How Does Fiscal Policy Affect GDP and Inflation in Ukraine?. Visnyk of the National Bank of Ukraine, 244, 25-43. https://doi.org/10.26531/vnbu2018.244.02
Citation Format

Metrics
References

Alesina, A., Ardagna, S., Perotti, R., Schiantarelli, F. (2002). Fiscal policy, profits, and investment. American Economic Review, 92(3), 571-589. https://doi.org/10.1257/00028280260136255

Arin, K., Helles, P., Koyuncu, M., Reich, O. (2016). Should we care about the composition of tax-based stimulus packages? Contemporary Economic Policy, 34(3), 430-445. https://doi.org/10.1111/coep.12131

Arin, K., Koray, F. (2006). Are some taxes different than others? An empirical investigation of the effects of tax policy in Canada. Empirical Economics, 31(1), 183-193. https://doi.org/10.1007/s00181-005-0032-7

Auerbach, A. J., Gorodnichenko, Y. (2012). Measuring the output responses to fiscal policy. American Economic Journal: Economic Policy, 4(2), 1-27. https://doi.org/10.1257/pol.4.2.1

Barro, R. J. (1991). Economic growth in a cross-section of countries. Quarterly Journal of Economics, 106(2), 407-443. https://doi.org/10.2307/2937943

Batini, P., Eyraud, L., Weber, A. (2014). A Simple Method to Compute Fiscal Multipliers. IMF Working Paper, No. 14/93. https://doi.org/10.5089/9781498357999.001

Baxter, M., King, R. (1993). Fiscal policy in general equilibrium. American Economic Review, 83(3), 315-334. Retrieved from https://www.jstor.org/stable/2117541

Blanchard, O., Perotti, R. (2002). An empirical characterization of the dynamic effects of changes in government spending and taxes on output. Quarterly Journal of Economics, 117(4), 1329-1368. https://doi.org/10.1162/003355302320935043

Bonam, D., de Haan, J., Soederhuizen, B. (2017). The effects of fiscal policy at the effective lower bound. DNB Working Paper, 565. https://doi.org/10.2139/ssrn.3014790

de Castro Fernandez, F., de Cos, P. (2006). The economic effects of exogenous fiscal shocks in Spain: a SVAR approach. ECB Working Paper Series, 647. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp647.pdf

Fatas, A., Mihov, I. (2009). Why fiscal stimulus is likely to work. International Finance, 12(1), 57-73. https://doi.org/10.1111/j.1468-2362.2009.01235.x

Giavazzi, F., Pagano, M. (1990). Can severe fiscal contractions be expansionary? Tales of two small european countries. CEPR Discussion Paper, 417. https://doi.org/10.3386/w3372

Giorno, C., Richardson, P., Roseveare, D., van der Noord, P. (1995). Estimating potential output, output gaps, and structural budget deficits. OECD Economics Department Working Papers, 152. https://doi.org/10.1787/533876774515

Heppke-Falk, K. H., Tenhofen, J., Heppke-Falk, K. H. (2006). The macroeconomic effects of exogenous fiscal policy shocks in Germany: A disaggregated analysis. Deutsche Bundesbank Discussion Paper, 41. Retrieved from https://core.ac.uk/download/pdf/6716975.pdf

Hasset, K. (2009). Why fiscal stimulus is unlikely to work. International Finance, 12(1), 75-91. https://doi.org/10.1111/j.1468-2362.2009.01237.x

Ilzetzki, E., Mendoza, E., Vegh, C. (2011). How big (small) are fiscal multipliers? IMF Working Papers, 11/52. https://doi.org/10.5089/9781455218028.001

Mankiw, G., Summers, L. (1984). Are tax cuts really expansionary? NBER Working Papers, 1443. https://doi.org/10.3386/w1443

Mertens, K., Ravn, M. (2013). The dynamic effects of personal and corporate income tax changes in the United States. American Economic Review, 103(4), 1212-1247. https://doi.org/10.1257/aer.103.4.1212

Mitra, T., Poghosyan, T. (2015). Fiscal multipliers in Ukraine. IMF Working Papers, 15/71. https://doi.org/10.5089/9781484305898.001

Nguyen, A., Onnis, L., Rossi, R. (2016). The macroeconomic effects of income and consumption tax changes. Centre for Growth and Business Cycle Research Discussion Paper Series, 227. Retrieved from http://hummedia.manchester.ac.uk/schools/soss/cgbcr/discussionpapers/dpcgbcr227.pdf

Parkyn, O., Vehbi, T. (2014). The effects of fiscal policy in New Zealand: Evidence from a VAR model with debt constraints. Economic Record, 90(290), 345-364. https://doi.org/10.1111/1475-4932.12116

Perotti, R. (2002). Estimating the effects of fiscal policy in OECD countries. ECB Working Paper, 168. Retrieved from https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp168.pdf

Persson, M., Persson, T., Svensson, L. (1996). Debt, cash flow and inflation incentives: a Swedish example. NBER Working Papers, 5772. https://doi.org/10.3386/w5772

Romer, C., Romer, D. (2010). The macroeconomic effects of tax changes: estimates based on a new measure of fiscal shocks. American Economic Review, 100(3), 763-801. https://doi.org/10.1257/aer.100.3.763

Rukelj, D. (2009). Modelling fiscal and monetary policy interactions in Croatia using structural vector error correction model. Privredna Kretanja i Ekonomska Politika, 19(121), 27-59. Retrieved from https://hrcak.srce.hr/48264

Stock, J., Watson, M. (1993). A simple estimator of cointegrating vectors in higher order integrated systems. Econometrica, 61(4), 783-820. https://doi.org/10.2307/2951763

Unal, U. (2015). Rethinking the effects of fiscal policy on macroeconomic aggregates: A disaggregated SVAR analysis. Journal for Economic Forecasting, 18(3), 120-135.
 

Rights and Permissions
This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third party material in this article are included in the article’s Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material.
Submit Your Paper