Design of fiscal consolidation packages and model-based fiscal multipliers in Croatia

Authors

Keywords:

fiscal consolidation, fiscal multipliers, Croatia, economic modelling

Abstract

The widening fiscal deficits and the increase of public debt triggered by the COVID-19 crisis suggest that fiscal policy makers will have to engage in substantial fiscal consolidation in order to stabilize public finances in the mid run. However, the implementation of a fiscal consolidation package, if it is not properly designed, can be detrimental for growth and even lead to a self-defeating outcome. To avoid this undesirable scenario, fiscal policy makers should rely on growth-friendly consolidation packages. We have built semi-structural macro-fiscal model of the Croatian economy to retrieve fiscal multipliers, analyse the design of the policy package and provide model-based evaluation of the macroeconomic effects of this consolidation episode. Our results indicate that the fiscal consolidation implemented during the EDP was not growth-friendly and that it was partially self-defeating. We hope that our results can help fiscal policy makers to avoid similar policy mistakes in future fiscal consolidations.

Additional Files

Published

2021-03-10

How to Cite

Deskar-Škrbić, M., & Milutinović, D. (2021). Design of fiscal consolidation packages and model-based fiscal multipliers in Croatia. Public Sector Economics - Submission Site, 45(1), 1–61. Retrieved from https://hrcak.srce.hr/ojs/index.php/pse/article/view/15501

Issue

Vol. 45 No. 1 (2021)

Section

Articles

License

Copyright (c) 2021 Milan Deskar-Škrbić, Darjan Milutinović

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

If accepted for publication, the authors will be asked to sign a Licence to Publish. Authors retain the copyright on the papers published in PSE  but grant the right of publication to the journal.
 
Authors must obtain the right to use copyright material (e.g. maps, drawings, literary quotes, lyrics) from its owner before publishing the paper in PSE.
 
PSE  is an Open Access Journal licensed under the Creative Commons Attribution-Non/Commercial 4.0 International License, which permits non-commercial use and redistribution, as long as the licensed work is passed along unchanged and in whole, with credit to PSE  as its original publisher.
 
The authors can make the results of their accepted papers available before they are published in PSE on preprint platforms, blogs, and other informal communication channels by providing a link to the PSE  website and noting that the manuscript will be published in PSE.
 
For complete information on copyright, please see Ethical guidelines for publication in PSE