1.

Macro-magnitudes
2. Inflation and unemployment
3. External sector
4. Economic policy
 GOALS
BALANCED
PRODUCTION PUBLIC
ACCOUNT
BALANCED
EMPLOYMENT PRICES EXTERNAL
ACCOUNT

Balance between public

expenditures and
revenues.
Economic growth Control of inflation Balance between a country’s
Reduction of unemployment economy and the rest of the
world.
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• Public expenditure Which items does the state spend on?

Two important components
• Taxes
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• OECD (Social Spending):

https://www.oecd.org/els/soc/expenditure.htm
• WB (Agrregate data): http://data.worldbank.org
• IFPRI (Statistics on Public Expenditures for Economic
Development):
• Public expenditure https://dataverse.harvard.edu/dataset.xhtml?persistentId
Two important components =doi:10.7910/DVN/INZ3QK
• Taxes • IMF:
https://www.imf.org/external/pubs/ft/weo/2018/02/weod
ata/index.aspx
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• Public expenditure
Two important components
• Taxes How is the taxation structure?
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• OECD: http://www.oecd.org/tax/tax-policy/tax-
database.htm
• WB (Agrregate data): http://data.worldbank.org
• Public expenditure • Eurostat:
Two important components http://ec.europa.eu/taxation_customs/tedb/taxSearch.html
• IMF:
• Taxes https://www.imf.org/external/pubs/ft/weo/2018/02/weod
ata/index.aspx
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• Public expenditure
Two important components government balance
• Taxes
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• Balanced budget
• Public expenditure
Two important components • Public surplus
• Taxes
• Public deficit Public debt
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• OECD: https://data.oecd.org/gga/general-government-
• Public expenditure deficit.htm
Two important components • WB (Agrregate data): http://data.worldbank.org
• Taxes • IMF:
https://www.imf.org/external/pubs/ft/weo/2018/02/weod
ata/index.aspx
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

If the government ↑expenditure or

↓taxes à expansive fiscal policy.
• Public expenditure
Two important components
• Taxes If the government ↓expenditure or
↑taxes à contractive fiscal policy.
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

Basically, we are talking about two tools: money supply and interest rates.

If the central bank ↑money supply or ↓interest rates à expansive monetary policy
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

Basically, we are talking about two tools: money supply and interest rates.

If the central bank ↓money supply or ↑interest rates à contractive monetary policy
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

Basically, we are talking about two tools: money supply and interest rates.

• OECD: https://data.oecd.org

• Central bank: http://www.ecb.europa.eu/home/html/index.en.html

 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

Tools to promote the employment and production à technological improvement,

productivity growth, boost competitiveness or liberalise the markets.
 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

Tools to promote the employment and production à technological improvement,

productivity growth, boost competitiveness or liberalise the markets.

• Insititute for Industrial Productivity : http://iepd.iipnetwork.org

 TOOLS

FISCAL MONETARY SUPPLY EXTERNAL

POLICY POLICY POLICY POLICY

• EU: http://madb.europa.eu/madb/indexPubli.htm • Trade policy à trade

control through tariffs,
• WTO: Two big tools
https://www.wto.org/english/res_e/reser_e/tariff_ quotas, …
profiles_e.htm
• Exchange rate.
 Problem: Fiscal policy
Goal:
unemployment Increase the Public expenditure
and decrease in employment
GDP and GDP

The increase in public The increase in spending

spending can makes the demand rises, the
unbalance the budget: companies will produce more
deficit and, to do that, they will hire
more factors
Increase in taxes

The increase in the

Reduction of demand can create
purchasing price tensions
power The goal of The goal of
employment production
Loss of purchasing improves improves
power, erosion of
Reduction of external
the demand competitiveness …
 GOALS POSSIBLE CONSEQUENCES

↑ Production
↑ Public deficit
Increase of public ↑GDP
Expansive ↑ Prices
spending and/or ↓ Unemployment
fiscal policy ↑ Interest rate
reduction of taxes
↑ Exchange rate
↑ Trade deficit

↓ Production
↓ Public deficit
Decrease of public ↓ Inflation
Contractive ↓ Prices
spending and/or ↓ Public deficit
fiscal policy ↓ Interest rate
rise of taxation ↓ Trade deficit
↓ Exchange rate
↓ Trade deficit
 GOALS POSSIBLE CONSEQUENCES

↑ Production
Decrease of interest ↓ Public deficit
Expansive ↑GDP
rate and/or ↑ Prices
monetary ↓ Unemployment
purchase of public ↓ Interest rate
policy ↓ Trade deficit
debt ↓ Exchange rate
↓ Trade deficit

↓ Production
↑ Public deficit
Contractive Increase of interest
↓ Inflation ↓ Prices
monetary rate and/or sale of
↑ Interest rate
policy public debt
↑ Exchange rate
↑ Trade deficit
Poland: reduction of taxation Hungary: contractive fiscal
and expansive monetary policy policy and relative stable
exchange rate

Change in Change in
Consumption
GDP growth budget deficit exchange rate
growth
(2007-2009) (2007-2009)

Poland +1.0% +2.5% +3.4% - 15.0%

Hungary - 6.5% - 8.1% - 1.0% - 5.0%

Source: IMF