Michał Mackiewicz

Making the Stability Pact More Flexible: Does it Lead to Pro-Cyclical Fiscal Policies?

One of the often discussed negative aspects of the Stability and Growth Pact is the rigidity of its deficit rule. Several reform proposals aim currently at alleviating the rule in order to allow the automatic stabilizers to operate freely. However, such a reform is likely to cause even further deterioration of fiscal balances in the member countries. The empirical evidence presented in this paper shows that, in the past, increasing the structural deficit had a strong negative impact on a degree of anti-cyclical fiscal stabilization. This suggests that the reform of the Pact, through higher structural deficits, can decrease rather then increase the scope of anti-cyclical fiscal actions in the EMU member countries.

The optimal fiscal rule in the context of accession to the Eurozone

The aim of the paper is to compare the macroeconomic effects of fiscal rules that can be applied in the context of the future full participation of Poland in the Economic and Monetary Union. The results of our analyses show that we observe the smallest changes in the structural balance when fiscal policy is aimed at both GDP stabilisation and business cycles synchronisation. Unfortunately, when we analyse the characteristics of the fiscal rule we discover that the possibility of effective practical application of such a rule is very limited. The reason for this may be the lack of transparency and delays we face in publishing macroeconomic data, which is indispensable for fiscal rule application.

The Effectiveness of Fiscal Policy Over the Business Cycle: A CEE Perspective

ABSTRACT In this article we analyze the effectiveness of fiscal policy—for a group of four Central and Eastern European countries. The recent literature shows that fiscal multipliers in the developed economies are higher during recession than expansion. So far, similar empirical analyses have been lacking for CEE countries. The results presented in this article show that fiscal multipliers in CEE countries differ with respect to the phase of the business cycle. Based on the SVAR methodology in which we allow for deterministic regime switching, we show that the government spending multipliers are significantly higher when the output gap is negative.