Transformations in
Business & Economics
- © Vilnius University, 2002-2015
- © Brno University of Technology, 2002-2015
- © University of Latvia, 2002-2015
Article
EFFECTIVENESS OF THE FISCAL POLICY IN STIMULATING ECONOMY: THE CASE OF POLAND
Piotr Krajewski
ABSTRACT.This paper assesses the effectiveness of the fiscal policy as a tool in stimulating GDP. The analysis was performed for the Polish economy on the basis of the New Keynesian model. The analysis shows that lowering of the tax rate is a more effective method of economy stimulation than increasing the government spending. The lowering of taxes affects stronger factors of production, both capital and labour, than the increased government spending. The results of the model with supply-side and demand-side mechanisms are, therefore, different, than it would be in the purely demand-side approach, in which the government spending has the greatest effect on the aggregate demand.
KEYWORDS: fiscal policy, government spending, taxes, New Keynesian model.
JEL classification: E62, H31, H32.