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Author: | Kattai, R. Lewis, J. |
Title: | Hooverism, hyperstabilization or halfway-house? Describing fiscal policy in Central and Eastern European EU members |
Journal: | Baltic journal of economics
2005 : SUMMER-AUTUMN, VOL. 5:2, p. 38-47 |
Index terms: | European Union fiscal policy Central Europe Eastern Europe |
Language: | eng |
Abstract: | A simple framework for describing fiscal policy where policymakers attempt to minimize deviation in output and budget balance from target values is developed in this article. Optimal policy is given by minimizing a quadratic loss function subject to a linear structure of the economy. This policy can be viewed as weighted average of two polar cases - the case where the budget deficit adjusts to eliminate any deviations from potential output (hyperstabilization) and the case where taxes and spending are determined exclusively by some budgetary goal (hooverism). Some evidence is found of stabilization for Poland, Latvia and Estonia. |
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