Comparison of the stabilising effects of government spending shocks in the Czech Republic, Hungary and Poland

Sa？etak This study examines the effects of government spending shocks in three Central and Eastern European (CEE) countries: the Czech Republic, Hungary and Poland. The article uses structural vector autoregression (SVAR) models with an identification scheme based on that of Blanchard and Perotti (2002). The results of government spending shocks in these countries are consistent with the general view that the spending innovation increases output in the short term. The impulse response functions show that the maximum response of output to spending shocks is lagged. In order to measure the effects of fiscal shocks, the peak and cumulative multipliers are calculated. In the baseline specification, which is the same for each country, the calculated peak spending multiplier (adjusted to be interpreted in the national currency) ranges from 0.2 in the Czech Republic to more than 1 in Poland. The response of GDP to spending shock is larger than 1 cumulativel