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
Date Written: December 16, 2021
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
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