Fiscal devaluation in a small open economy

0505022 - NHU-C 2020 RIV RU eng J - Journal Article
Ambriško, Róbert
Fiscal devaluation in a small open economy.
Russian Journal of Money and Finance. Roč. 78, č. 1 (2019), s. 67-88. ISSN 0130-3090
Institutional support: Progres-Q24
Keywords : Bayesian estimation * DSGE * fiscal devaluation
OECD category: Applied Economics, Econometrics
Method of publishing: Open access
https://rjmf.econs.online/upload/iblock/64a/RJMF_78-01_ENG_Ambrisko.pdf

Fiscal devaluation, meaning a shift from payroll to indirect taxes, can be beneficial for a small open economy such as the Czech Republic. Using a structural fiscal DSGE model, I show that fiscal devaluation can boost real GDP growth by 0.5 percentage points in the first year, when a budget-neutral tax shift of the magnitude of 1% of GDP occurs from direct taxes to consumption tax. I also calculate fiscal multipliers for several revenue and expenditure categories of the government budget, the largest of which (after the first year) are government consumption (0.6), government investment (0.5), and social security contributions paid by employers (0.4). These results corroborate the hypothesis that the government can easily boost the economy by adjusting fiscal instruments appropriately.
Permanent Link: http://hdl.handle.net/11104/0296548