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Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy?



Visnyk of the National Bank of Ukraine, 2018, No. 245, pp. 45-63

https://doi.org/10.26531/vnbu2018.245.03


Estimating the Fiscal Impulse in Ukraine

Artem Vdovychenko a

a National Bank of Ukraine, Kyiv, Ukraine


Abstract

This paper estimates the fiscal impulse for Ukraine following the methodology of the OECD, which disaggregates budget revenues and expenditures into categories that are driven by economic cycles. To estimate the fiscal impulse the author calculates both long-term and short-term elasticities of various budget items with respect to GDP. This approach allows the author (i) to identify the fiscal policy response to economic crises in Ukraine in 2008–2009 and in 2014, and (ii) to reveal those budget items that remain sensitive to the fluctuations in the business cycle. The fiscal policy response to the 2014 crisis is found to be significantly tighter than the response to the crisis of 2008–2009. In addition, corporate income tax shows the strongest response to economic cycles among budget revenue categories, while VAT has the greatest contribution to the cyclical component of Ukraine’s budget balance.


JEL Codes: E62, H3, H61, C22

Keywords: fiscal stance, fiscal impulse, dynamic least squares, autoregressive distributed lag model

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Citation: Vdovychenko A. (2018). Estimating the Fiscal Impulse in Ukraine. Visnyk of the National Bank of Ukraine, No. 245, pp. 45-63. https://doi.org/10.26531/vnbu2018.245.03

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