Template-Type: ReDIF-Paper 1.0
Author-Name: Ágnes Horváth 
Author-X-Name-First: Ágnes
Author-X-Name-Last: Horváth
Author-Email: horvatha@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Zoltán M. Jakab
Author-X-Name-First: Zoltán M.
Author-X-Name-Last: Jakab
Author-Email: jakabz@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Gábor P. Kiss
Author-X-Name-First: Gábor
Author-X-Name-Last: P. Kiss
Author-Email: kissg@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Name: Balázs Párkányi
Author-X-Name-First: Balázs
Author-X-Name-Last: Párkányi
Author-Email: parkanyib@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank

Title: Myths and Maths: Macroeconomic Effects of Fiscal Adjustments in Hungary

Abstract: In this paper we investigate the possible effects of fiscal tightening in Hungary from two perspectives. First, simulations in an estimated neo-Keynesian model are used to characterise the effects of different scenarios for fiscal consolidations. We show that the composition of fiscal shocks is important for both the economic outcome and monetary policy. These simulations suggest a modest output cost of fiscal consolidation. Then we take a closer look at the non-Keynesian effects and their relevance for Hungary in a qualitative way. In our review of non-Keynesian channels of fiscal adjustments we conclude that expansionary effects are likely to become evident only in the medium or long run, rather than immediately after measures are taken.

Length: 61 pages
Creation-Date: 2006
File-URL: http://www.mnb.hu/letoltes/op-52.pdf
File-Format: Application/pdf

Number: 2006/52
Classification-JEL: E17, E52, E61, E62, E63, E65, H30.
Keywords: Keynesian, non-Keynesian effects, expansionary fiscal adjustment, Monetary policy reactions, Model simulations.
Handle: RePEc:mnb:opaper:2006/52