Absorption Boom and Fiscal Stance: What Lies Ahead in Eastern Europe?

Author/Editor: Rahman, Jesmin
Publication Date: April 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper estimates revenue and expenditure pro-cyclicality with respect to output and domestic absorption in new member states of the European Union and Croatia to assess whether these countries used the boom years of 2003-07 to create sufficient fiscal space. The current crisis has found many countries short of fiscal space. As these countries enter a different phase of capital inflows, some with large vulnerabilities and inflexible monetary policy options, the role of fiscal policy becomes more important. This paper also looks at these issues to see how fiscal policy can play a more effective role in demand management in these countries.
Series: Working Paper No. 10/97
Subject(s): Business cycles | Capital inflows | Croatia | Demand | Eastern Europe | Economic growth | European Economic and Monetary Union | Fiscal policy | Government expenditures | Revenues

Author's Keyword(s): Fiscal space | Pro-cyclicality | fiscal policy | cyclically-adjusted fiscal balance
Publication Date: April 01, 2010
Format: Paper
Stock No: WPIEA2010097 Pages: 31
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US$18.00 )
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