Fiscal devaluation and economic activity in the EU

Ciżkowicz, Piotr; Radzikowski, Bartosz; Rzońca, Andrzej; Wojciechowski, Wiktor

doi:10.1016/j.econmod.2019.09.010

Cited by 8 publications

(6 citation statements)

References 15 publications

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“…As the additional explanatory variables employed in the regressions we used cyclically adjusted primary balance, output gap, unemployment rate and nominal effective exchange rate. Following Ciżkowicz et al (2020), we used NEER instead of REER to avoid situation in which the effects of fiscal devaluation would be partially cancel out by deflation factor: in case of HICP/CPI it could cancel out the impact of VAT increase and -in case of unit labour coststhe impact of ESSC decreases. The data on fiscal balance and output gap were taken from EC AMECO database and the remaining two variables were derived from Eurostat.…”

Section: Datamentioning

confidence: 99%

“…Firstly, we contribute to the empirical literature by verifying the impact of FD on economic performance for a panel covering 26 EU economies and UK over the period 1995-2019. Unlike other papers, our sample includes New Member States (NMS) where FD episodes have been frequent but their effects have only been studied in a few papers (Holzner et al, 2018;Ciżkowicz et al, 2020). In addition, we analyse FD effects for a broad set of macroeconomic variables (i.e.…”

Section: Introductionmentioning

confidence: 99%

“…the European Commission, which recommended FD to countries such as Belgium, France, Italy, Latvia, and Spain (EC,2016) or the Troika, which in its rescue program for Portugal in 2012, made the implementation of FD a conditional requirement (Puglisi, 2014). Notably, Ciżkowicz et al (2020) identify 33 instances of robust FD in EU countries during the period spanning from 1995 to 2014. FD has been also considered as a response to the challenges of the post-Covid economic conditions, where slowing growth and high inflationary pressure are accompanied by significantly reduced fiscal space due to the fiscal costs of the pandemic.…”

Section: Introductionmentioning

confidence: 99%

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Does fiscal devaluation always work? A sectoral and business cycle perspective

Ciżkowicz

Rzońca

Wojciechowski

2023

Preprint

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The study verifies effects of fiscal devaluation on a broad set of sector and firm-level macroeconomic variables among European economies in years 1995-2019. Using local projection and panel data models it finds that fiscal devaluation impact on employment is stronger in services and small businesses, where production is most labour intensive. In turn, in manufacturing, where production is capital intensive, firms may substitute capital for labour in response to fiscal devaluation. Lastly, fiscal devaluation favours employment in recessions more than in times of economic expansions, as only in recessions it reduces labour costs in a more lasting way. JEL codes: C33, E24, E62, E63, J50, H30, H60

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Section: Datamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Does fiscal devaluation always work? A sectoral and business cycle perspective

Ciżkowicz

Rzońca

Wojciechowski

2023

Preprint

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“…The authors show that while for the Czech Republic the depreciations are neutral, for Hungary the appreciation of the currency leads to an increase in domestic production in the long term, for Estonia, Latvia and Russia the effects are mixed (the depreciations are expansionary and the appreciations are contractionary). Ciżkowicz et al (2020) analyzed the EU27 countries in the period 1995-2014 to observe if a fiscal devaluation could be used as a possible instrument for restoring competitiveness, especially in the peripheral countries of the Euro Zone. They find that fiscal devaluation especially works where economic activity is strongly reduced and in sectors more exposed to external competition, the effects being nonlinear.…”

Section: Literature Reviewmentioning

confidence: 99%

Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries

Ţigănaşu

Pascariu

Lupu

2022

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Research background: The transformations induced by global challenges call for new approaches towards competitiveness and thus require a consistent rethinking of strategies and mechanisms so that they could be better adapted to the constantly changing context. Prior to the European Union (EU) accession, the Central and Eastern European (CEE) states began a broad process of economic reforms, including trade liberalization, mass privatization, exchange rate liberalization, all of which led to a wider opening to new markets, the creation of new opportunities for production and to ensuring the competitiveness of companies on foreign markets. By far, the most important step in the post-communist period was joining the EU, achieved after 2004. Over time, these states have faced, on the one hand, issues related to addressing systemic vulnerabilities, and on the other hand, finding the most appropriate measures to induce competitiveness. The influence of public policies on competitiveness is still an issue that needs to be debated, our study proposing to examine the reaction of external competitiveness to the increase of government spending and corruption. Purpose of the article: The aim of this paper is to analyze the impact of fiscal policies and corruption on the external competitiveness of the eleven countries from Eastern Europe (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) for the period 1995?2020. The choice of this time interval is to better capture the trinomial relationship between competitiveness, fiscal policy and corruption before and after the process of integration of the CEE states into the EU. Methods: The methodology chosen is based on ARDL (Autoregressive Distributed Lag) with structural breaks, the period taken into account being 1995?2020. The Unit root test of augmented Dickey?Fuller ADF (2016) was used to assess the time series stationarity. The test developed by Bai and Perron (2003) is applied to detect structural breaks, by resorting to the LM test. The tests for the cointegration between the considered variables, using the ARDL model, proposed by Pesaran et al. (2001), were also part of the research. The causality test of Granger et al. (2000) was used to assess the conditionality between the indicators. By applying these methods, it was highlighted that, especially after 2007, in the states under analysis, expansionary fiscal policies have led to internal devaluations of the currency, which ultimately increased external competitiveness, measured as real effective exchange rate. Instead, corruption has a negative impact on competitiveness. Findings & value added: The obtained results point out the relationship between competitiveness, fiscal policy and corruption in CEE countries. In the case of those that have a high competitiveness, even if there are large government expenditures, there is also an economic environment conducive to the implementation of measures that generate added value on a large scale. Conversely, in countries where corruption is high, the impact of government fiscal policies on competitiveness is reduced due to the negative effects caused by this phenomenon. Our study brings at least two contributions to the literature. First of all, the research shows how a growth in public spending affects the competitiveness of CEE economies through the real exchange rate. Secondly, it takes into account the phenomenon of corruption applied to Eastern countries, emphasizing a decrease in the external competitiveness of these economies in response to the manifestation of corruption.

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“…Foi constatado que a eficácia de uma desvalorização fiscal depende crucialmente dos instrumentos fiscais utilizados. Ciżkowicz et al (2019), enfatiza que após a crise financeira global, a desvalorização fiscal, conhecida como uma mudança na tributação da mão de obra para o consumo, foi debatida como uma ferramenta possível para restaurar a competitividade. Utilizando a modelagem econométrica com dados de painéis e painéis espaciais para 27 países da União Europeia, no período 1995-2014, obtiveram como resultados que a desvalorização fiscal aumenta o valor agregado das exportações, melhora as exportações líquidas, acelera o crescimento do PIB, aumenta o emprego e desacelera o crescimento dos custos do trabalho.…”

Section: Referencial Teóricounclassified

Impactos da Desoneração da folha de pagamentos sobre o emprego formal e a competitividade industrial: Uma aproximação pelo método de Difference in Differences com Propensity Score Matching

Freitas

Paes

2022

Estud. Econ.

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Resumo O presente estudo tem como objetivo mensurar os efeitos da política de desoneração da folha de salários sobre o emprego formal e a competitividade industrial. Para isso, uma ampla revisão de literatura foi inserida no trabalho, principalmente o enfoque nos métodos de mensuração e na base de dados. Os dados do emprego foram coletados da Relação Anual de Informações Sociais (RAIS, 2020) e para os indicadores industriais os dados disponíveis na Confederação Nacional da Indústria (CNI, 2020). Para a estratégia empírica de avaliação de impacto da política foi utilizado o modelo de diferenças em diferenças (DID) com Propensity Score Matching (PSM) e o modelo de triplas diferenças. Testes de robustez e sensibilidade também foram utilizados. Por fim, os resultados apontaram para um efeito médio de 2,44 p. p. e 1,12 p. p. da política de desoneração da folha sobre o emprego: quantidade de horas trabalhadas e quantidade de vínculos, respectivamente. Esse resultado retrata a comparação entre o grupo de setores desonerados em relação ao grupo não desonerado. Outro resultado importante levou em consideração a tendência temporal. Os efeitos da política de desoneração da folha de salários logo no início da implantação da lei (2012) sobre o emprego foi, em média, 1,8 p. p. (horas trabalhadas) e 1,5 p. p. (vínculos), e como passar dos anos esse efeito caiu, atingindo 0,6 p. p. em 2018. Apenas na janela de 2015 e 2016, o estimador mostrou-se significativo e o efeito da política de desoneração da folha de salários aumentou a competitividade da indústria brasileira: -36,7 p. p. (2015) e -45,2 p. p. (2016).

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Fiscal devaluation and economic activity in the EU

Cited by 8 publications

References 15 publications

Does fiscal devaluation always work? A sectoral and business cycle perspective

Does fiscal devaluation always work? A sectoral and business cycle perspective

Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries

Impactos da Desoneração da folha de pagamentos sobre o emprego formal e a competitividade industrial: Uma aproximação pelo método de Difference in Differences com Propensity Score Matching

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