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http://ssrn.com/abstract=2102561
 
 

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Fiscal Multipliers and Factors of Growth in Poland and the Czech Republic in 2009


Kazimierz Laski


Vienna Institute of International Economic Studies (WIIW)

Jerzy Osiatyński


affiliation not provided to SSRN

Jolanta Zięba


affiliation not provided to SSRN

June 1, 2012


Abstract:     
First, the concept of public expenditure multiplier is redefined to allow for import intensity of exports, and its value is estimated for Poland and the Czech Republic in 2008-2009. Next, on the basis of effective demand model of economic dynamics, there follows a comparative analysis of GDP dynamics in the two countries in 2008-09 and of the factors that in 2009 made the rate of GDP growth positive in Poland and negative in Czech Republic. In 2009 both countries experienced the rate of exchange depreciation which, however, was significantly greater in Poland, as was the rise of rate of private savings, which negatively affects the GDP growth rate. On the other hand, fiscal expansion was slightly greater in Czech Republic than in Poland. What factors then helped to avoid the GDP growth to decline in 2009 in Poland but not in the Czech Republic? The key difference in the GDP generation was that in the latter country net exports were too small to offset the rate of growth of private savings, while in Poland improvement in the trade balance, heavily negative in earlier years, together with strong fiscal expansion outbalanced the effect of much greater than in the Czech Republic rise in the rate of private savings. The derived results are strongly sensitive to variations in such parameters of our model as sectoral import intensities and private propensity to save, which may well change with changes in growth of GDP and its components. This does not undermine theoretical foundations of our analysis, yet it limits validity of any conclusions with respect to hypothetical future impact of fiscal expansion or fiscal contraction. Nevertheless, it appears that maintaining a positive rate of GDP growth may require that the rate of private savings no longer continues to rise (i.e. that the average private propensity to consume no longer falls) at least until the dynamics of private investment and/or exports do not recover.

Number of Pages in PDF File: 28

Keywords: macroeconomics, effective demand principle, multiplier, stabilization policy

JEL Classification: E0, E12, E20, E63

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Date posted: July 11, 2012  

Suggested Citation

Laski, Kazimierz and Osiatyński, Jerzy and Zięba, Jolanta, Fiscal Multipliers and Factors of Growth in Poland and the Czech Republic in 2009 (June 1, 2012). Available at SSRN: http://ssrn.com/abstract=2102561 or http://dx.doi.org/10.2139/ssrn.2102561

Contact Information

Kazimierz Laski (Contact Author)
Vienna Institute of International Economic Studies (WIIW) ( email )
Oppolzergasse 6
1010 Wien
Austria
Jerzy Osiatyński
affiliation not provided to SSRN ( email )
Jolanta Zięba
affiliation not provided to SSRN ( email )
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