Abstract
We provide the estimates of the fiscal multiplier in the Czech economy, based on the methodology of the fiscal VAR. We utilize the dataset with quarterly data on a sample from the first quarter of 1998 to the second quarter of 2009.
Our main results are as follows. Firstly, government expenditures have a positive and significant impact on the GDP.
By contrast, a response of GDP on a shock to government revenues is slightly negative and in most specifications not significant. Secondly, these results are robust to various sensitivity checks.
Consequently, the restoration of sustainable fiscal policy should focus rather on the revenues side than in the government expenditures, since a significant cut in government spending would probably have slowed down economic growth. Finally, uncertainty connected with our results is large, namely in comparison with existing studies on the effects of monetary policy.