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

Rahman, Jesmin

doi:10.2139/ssrn.1590710

SSRN Journal

2010

DOI: 10.2139/ssrn.1590710

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

Jesmin Rahman

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Cited by 4 publications

(2 citation statements)

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“…With the exception of Bulgaria, Denmark, Finland, Luxembourg, Spain, and Sweden, all other EU countries pursued a pro-cyclical fiscal position during 2003-07, as captured by the cyclically-adjusted fiscal balance in the WEO database Rahman (2010). shows that most countries in emerging Europe experienced pro-cyclical revenue boom during 2003-7, but only a few countries managed to translate this into higher fiscal space as expenditure policies were also pro-cyclical.©International Monetary Fund.…”

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Rebalancing: Evidence from Current Account Adjustment in Europe

Atoyan¹,

Manning²,

Rahman³

2013

IMF Working Papers

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After the 2003-2007 economic boom, European countries with large pre-crisis current account imbalances are undergoing adjustments. Countries are adjusting at different paces and ways reflecting the source and magnitude of imbalances, availability of financing, competitiveness of the tradable sector and external environment. While emerging European countries with large pre-crisis imbalances and a fixed exchange rate regime have seen sharp current account adjustments and a rebound in growth, adjustment in the euro zone periphery countries, which are also carrying a legacy of pre-crisis CA imbalances, has been gradual with difficulties bringing back growth. This paper is an empirical investigation of current account adjustment in Europe with a focus on these two groups, looking at contributions from cyclical and other factors, and seeking to draw policy conclusions.

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confidence: 99%

Rebalancing: Evidence from Current Account Adjustment in Europe

Atoyan¹,

Manning²,

Rahman³

2013

IMF Working Papers

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“…Rahman (2010) andBakker and Gulde (2010) provide extensive discussions of the fiscal policy stance in emerging European countries during the absorption boom years.10 These examples of "countercyclical" policies in the boom years should be viewed in the context of relative performance vis-à-vis other regional peers. Most countries fed the windfall revenues from an unsustainable domestic demand boom back into excessive expenditure growth.…”

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confidence: 99%

The Pre-Crisis Capital Flow Surge to Emerging Europe: Did Countercyclical Fiscal Policy Make a Difference?

Atoyan

Smith²,

Jaeger³

2012

IMF Working Papers

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A push-pull-brake model of capital flows is used to study the effects of fiscal policy changes on private capital flows to emerging Europe during 2000-07. In the model, countercyclical fiscal policy has two opposing effects on capital inflows: (i) a conventional absorptionreducing effect, as a tighter fiscal stance acts as a brake on capital flows; and (ii) an unconventional absorption-boosting effect, as a tighter fiscal stance increases investor confidence in the country. The empirical results suggest that push factors (low returns in flow-originating countries), rather than pull factors (high returns in flow-destination countries), drove most of the private capital flows to emerging Europe. And active countercyclical fiscal policy-once the fiscal stance is adjusted for the automatic effects on the fiscal position of both internal and external imbalances-acted as a brake on capital inflows. However, the empirical results also suggest that, even abstracting from political feasibility and fiscal policy lag considerations, countercyclical fiscal policy alone is unlikely to be an effective policy tool to put an effective brake on sudden capital flow surges.

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The Impact of the Global Crisis on South-Eastern Europe

Cocozza

Colabella

Spadafora³

et al. 2011

SSRN Journal

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

Cited by 4 publications

References 7 publications

Rebalancing: Evidence from Current Account Adjustment in Europe

Rebalancing: Evidence from Current Account Adjustment in Europe

The Pre-Crisis Capital Flow Surge to Emerging Europe: Did Countercyclical Fiscal Policy Make a Difference?

The Impact of the Global Crisis on South-Eastern Europe

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