Prague Economic Papers 2016, 25(2):175-188 | DOI: 10.18267/j.pep.553

Fiscal Sustainability in Central and Eastern European Countries - A Post-Crisis Assessment

Piotr Krajewski1, Michał Mackiewicz2, Agata Szymańska3
1 University of Lodz, Institute of Economics, Lodz, Poland (piotr_krajewski@uni.lodz.pl).
2 University of Lodz, Institute of Economics, Lodz, Poland (makiewicz@uni.lodz.pl).
3 University of Lodz, Institute of Economics, Lodz, Poland (agata.szymanska@poczta.onet.pl).

The aim of this paper is to investigate public finance sustainability for a selected group of ten Central and Eastern European countries. In order to assess the fiscal sustainability of these countries we extend standard analyses typically used for developed countries to our group of ten CEE countries. To assess fiscal sustainability we use panel stationarity and cointegration tests, as well as estimates of certain parameters of fiscal reaction functions. Our research shows that despite the financial turmoil, CEE countries demonstrate the existence of a long-term relationship between revenues and expenditures and they have statistically relevant parameters of the fiscal reaction function. This indicates that the public finances in CEE countries are sustainable despite the crisis. However, the analysed group of countries shows sustainability only in a weak sense, which may pose a threat to public finances in the future.

Keywords: public finances, public debt, fiscal sustainability, fiscal policy, CEE countries
JEL classification: E62

Published: January 1, 2016  Show citation

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Krajewski, P., Mackiewicz, M., & Szymańska, A. (2016). Fiscal Sustainability in Central and Eastern European Countries - A Post-Crisis Assessment. Prague Economic Papers25(2), 175-188. doi: 10.18267/j.pep.553
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