Impact of Fiscal Measures in Response to the COVID-19 Pandemic on Small-Open Economies: Lessons from Slovenia

22 Pages Posted: 15 Dec 2021 Last revised: 18 Dec 2021

See all articles by Filippo Arigoni

Filippo Arigoni

Bank of Slovenia

Miha Breznikar

Bank of Slovenia

Črt Lenarčič

Bank of Slovenia

Matjaz Maletic

European Central Bank (ECB)

Date Written: December 16, 2021

Abstract

We estimate the impact of the fiscal expansion in response to the COVID-19 outbreak on the Slovene economy via a twofold approach. First, we simulate fiscal shocks in a three-scenario setup using a calibrated large-scale DSGE model. Second, we employ a small-scale VAR model to check the robustness of the theoretical results. The findings suggest a significant response of GDP, private consumption, and imports to fiscal shocks. In particular, the outcomes highlight that a government consumption shock explains the lion’s share of domestic fluctuations, compared to other unanticipated fiscal developments. The main transmission channel is high complementarity between private and government consumption.

Keywords: Fiscal shocks, Fiscal multipliers, DSGE model, VAR model

JEL Classification: C32, E32, E62

Suggested Citation

Arigoni, Filippo and Breznikar, Miha and Lenarčič, Črt and Maletic, Matjaz, Impact of Fiscal Measures in Response to the COVID-19 Pandemic on Small-Open Economies: Lessons from Slovenia (December 16, 2021). Available at SSRN: https://ssrn.com/abstract=3984765 or http://dx.doi.org/10.2139/ssrn.3984765

Filippo Arigoni

Bank of Slovenia ( email )

Slovenska cesta 35
Slovenija, 1505
Slovenia

Miha Breznikar

Bank of Slovenia ( email )

Slovenska cesta 35
Slovenija, 1505
Slovenia

Črt Lenarčič (Contact Author)

Bank of Slovenia ( email )

Slovenska cesta 35
Slovenija, 1505
Slovenia

Matjaz Maletic

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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