Original scientific paper
https://doi.org/10.18045/zbefri.2018.1.83
Dynamic effects of fiscal policy in Croatia: confronting New-Keynesian SOE theory with empirics
Milan Deskar-Škrbić
; Erste&Steiermarkische bank, Zagreb, Croatia
Abstract
In this paper we calibrate a small open economy (SOE) New-Keynesian DSGE model for the Croatian economy. The main focus of the paper is on the eJects of fiscal policy, more precisely government consumption, on employment, output, inflation and trade balance. After we analyse the model impulse responses we confront these results with the empirical results of VAR model. Our results indicate that the presented DSGE model can be a useful starting point and a toolkit in fiscal policy analysis in Croatia as estimated impulse responses from VAR model mostly match impulse responses from the calibrated model. Also, empirical results indicate that fiscal policy has a significant eJect on macroeconomic developments in Croatia. Thus, it is a responsibility of fiscal policy makers to prudently use and adjust fiscal instruments in such a way that fiscal policy can always have a counter-cyclical, stabilizing eJect on Croatian economy.
Keywords
fiscal policy; DSGE; VAR; Croatia
Hrčak ID:
202054
URI
Publication date:
26.6.2018.
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