Impact of fiscal measures in response to the COVID-19 pandemic on small-open economies: lessons from Slovenia

Arigoni, Filippo and Breznikar, Miha and Lenarčič, Črt and Maletič, Matjaž (2023): Impact of fiscal measures in response to the COVID-19 pandemic on small-open economies: lessons from Slovenia.

Abstract

We assess the impact of the fiscal expansion in response to the COVID-19 pandemic on the Slovenian economy via a twofold approach. Firstly, we employ a structural VAR model in order to estimate the effects of fiscal shocks. The findings suggest a significant response of GDP, private consumption, and imports to fiscal shocks. Secondly, we simulate fiscal shocks in a three-scenario setup using a calibrated large-scale DSGE model. The outcomes of this highlight that a government consumption shock explains the lion's share of domestic fluctuations, compared to other unanticipated fiscal developments. The main transmission channel is high complementarity between private and government consumption.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal shocks, COVID-19 crisis, Fiscal multipliers, DSGE model, VAR model
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

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