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Title: Essays in debt sustainability, effects of institutional changes on fiscal policy in the Euro area and consumption responses to a shock in public salaries
Author: Ždárek, Václav
ISNI:       0000 0004 6423 8122
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2017
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The worst economic and financial crisis since the Great Depression in the 1930s, the Great Recession, followed by the Sovereign Debt Crisis (ESDC) in Euro area countries have revived interest in fiscal policy, and particularly in various topics related to its interactions with monetary policy in a monetary union. Despite a recent surge in theoretical and empirical work in this area, there are still many important questions that have not been explored and this thesis aims to fill this gap. This thesis consists of three essays. Chapter one and chapter two focus on particular sets of questions that partially address newly emerging problems in the wake of the ESDC. Their common link is the existence of the Euro area and problems of national fiscal policies in this monetary union. Chapter three analyses effects of a government intervention in the form of an unexpected public sector salary increase. The main focus of chapter one is on fiscal (debt) sustainability and the so-called fiscal fatigue hypothesis (`debt legacy'). For that purpose I firstly estimate a fiscal policy rule for Euro area countries, and test its robustness with various economic, financial and institutional determinants. Subsequently, the fiscal fatigue hypothesis is examined by estimating a non-linear specification of the same fiscal policy rule as suggested in the literature. In addition, I propose a simple linear debt rule for identifying the risk of fiscal fatigue. In chapter two I analyse the fiscal policy behaviour of `old' Euro area countries (EA-12) and three stand-alone EU countries (EU-3), given institutional constraints imposed on fiscal policy in the wake of the European integration process. To capture the changing nature of fiscal behaviour, I estimate a Bayesian time-varying parameter fiscal rule. Since fiscal harmonization is an important consequence of fiscal constraint, I also try to capture that effect by looking at the dispersion of country-specific Euro area fiscal behaviour and compare it with countries facing less strict fiscal constraints (EU-3). The last chapter aims to shed some light on a government intervention (a quasi-natural experiment) represented by an unexpected increase of public employees' salary. Given the type of intervention, I can construct a `natural' treated and a control group (private employees) and link them with data from a household budget survey. To compare their consumption behaviour, I estimate a regression model controlling for relevant economic and socio-demographic characteristics.
Supervisor: Not available Sponsor: European Central Bank
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HG Finance