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The effectiveness of fiscal spending in Croatia, Slovenia and Serbia: the role of trade openness and public debt level

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  • Milan Deskar-Škrbić
  • Hrvoje Šimović

Abstract

Various structural characteristics of economies, directly or indirectly, affect the transmission from government stimuli to economic activity and determine the size of fiscal multipliers. In this article, we expand the standard Blanchard–Perotti fiscal SVAR model by incorporating the public debt and trade openness variables to assess the influence of these structural determinants on the effectiveness of fiscal spending in three selected former Yugoslav countries – Slovenia, Croatia and Serbia. The results confirmed the main hypotheses, which state that public debt level and trade openness significantly affect the effectiveness of fiscal spending through the means of reduction in size of fiscal effects in all countries analysed. When comparing internationally, this reduction tends to be more evident in countries with a higher degree of average public debt level and trade openness.

Suggested Citation

  • Milan Deskar-Škrbić & Hrvoje Šimović, 2017. "The effectiveness of fiscal spending in Croatia, Slovenia and Serbia: the role of trade openness and public debt level," Post-Communist Economies, Taylor & Francis Journals, vol. 29(3), pages 336-358, July.
    • Handle: RePEc:taf:pocoec:v:29:y:2017:i:3:p:336-358
    DOI: 10.1080/14631377.2016.1267972
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    5. Vladimir Arcabic, 2018. "Fiscal convergence and sustainability in the European Union," Public Sector Economics, Institute of Public Finance, vol. 42(4), pages 353-380.

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