The impact of fiscal policy on private consumption and social outcomes in Europe and the CIS

The paper studies the effects of fiscal policy on per-capita private consumption and social outcomes in a simultaneous equations framework. The focus is on transition economies and the model specification allows for a non-linear response of socio-economic variables to fiscal policy depending on the fiscal regime. Key results are (i) fiscal policy has Keynesian effects in transition countries and non-Keynesian effects in high-income OECD economies, but only outside normal times, (ii) public health and social protection expenditure improve social outcomes, and (iii) there is evidence of electoral business cycle of fiscal policy in both transition and high-income countries.