Prague Economic Papers 2004, 13(2):142-158 | DOI: 10.18267/j.pep.236

Fiscal Consolidation in General Equilibrium Framework (the case of the Czech Republic)

Jaromír Hurník
Czech National Bank, Na Příkopě 28, CZ - 115 03 Prague 1 and University of Economics, 4, W. Churchill Sq., 130 67 Prague 3 (e-mail: jaromir.hurnik@cnb.cz).

Within the non-stochastic dynamic general equilibrium model framework this paper examines the implications of alternative fiscal consolidation programs for small open economy. The calibrated model enables realistically quantify the impact of the deficit financing and fiscal consolidation on consumption and saving of households, investment of firms and thereby on the capital stock and real interest rates. Through the interest rate link the impact of deficit financing and fiscal consolidation on cyclical and long-term properties of monetary policy set-up can be observed. Several fiscal consolidations were simulated in order to demonstrate the comparative statics and differences in dynamic paths of above mentioned variables.

Keywords: fiscal consolidation, general equilibrium model
JEL classification: E10, E62, H30

Published: January 1, 2004  Show citation

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Hurník, J. (2004). Fiscal Consolidation in General Equilibrium Framework (the case of the Czech Republic). Prague Economic Papers, 13(2), 142-158. doi: 10.18267/j.pep.236
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