E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General OutlookReturn

We analyse potential sources of internal imbalances, specifically as regards private and public indebtedness. The combination of a high public debt and increasing private sector indebtedness have been a source of concern in the perspective of the funding of the economy in examined countries. We utilize the detailed financial accounts as an analytical framework for revealing the development of private sector 's indebtedness in 18 EU countries in the period 1995-2012. Ratio of private debt (non-financial corporations, households and non-profit institutions serving households) to GDP was steadily increasing till 2009 with a decrease in the following years. After the decomposition of the private sector debt several facts stand out. Highly indebted, on the average, are households in Denmark and The Netherlands. Postsocialist countries have still low indebtedness, but are catching up. In panel regressions (fixed effects) the dependent variable is overlapping two-and free-year forward looking averages. The control variables are those usually used in growth equations a la R. Barro. We have utilised also instrumental variables (Pooled IV Two-stage EGLS) and 3 years averages for all variables to capture medium-run impacts. Having analysed the impacts of different private debt variables on the growth rate of real GDP we assert that the impact has been negative and statistically significant in almost all growth regressions.

Starting from endogenous growth models we test the impacts of both taxes (distortionary and non-distortionary) and expenditures (taking into account economic and functional classification of general government expenditure) using the government constraint. We do not neglect the implicit financing assumptions built into the specification of regression utilising both control and fiscal variables. Static and dynamic panel analysis (fixed effects model) of the 25 EU countries covers the period 1995-2008 for the majority of observations. Forward looking moving averages of the growth rate of GDP (2-5 years) are the dependent variable. We find that productive government expenditure supports growth, whilst non-productive expenditure, especially social protection (COFOG) or social payments (Ameco) does not. Distortionary and indirect taxes reduce economic growth.

The goal of analysis of business cycle development in the Czech Republic is to identify causes and consequences of economic activity fluctuations in the 1990 to 2003 period. The approach to analysis of economic activity fluctuations is based on this part of business cycle theory which is oriented to the links between macroeconomic equilibrium and economic growth. Description of contexts between changes in the economic environment, nature of the demand and supply side of the economy and a character of external and internal balance provides the economic framework for the analysis. The decomposition of supply and demand to its components enabled the identification of their sensitivity to the business cycle development. Special emphasis is put on the indicators of internal and external balances which signal in advance the possibility of an economic slowdown or a drop in the economic activity.