Why is this Financial Crisis Occuring? How to Respond to It?

by Altar, Moisa; Necula, Ciprian and Bobeica, Gabriel
Published in Romanian Journal of Economic Forecasting
, 2008, volume 9 issue 4, 146-160

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Taking into consideration the importance of the sustainability of public finance, in the present study we calibrate and simulate a three-sector Greiner, Semmler and Gong (2004) model for the Romanian economy. The simulations were performed considering three fiscal regimes, defined according to the way the government expenditures were financed. By calibrating the model to the Romanian economy, we determine for each fiscal regime the optimal tax rate, that is the tax that maximizes the long-run growth rate, and we forecast the evolution of the real GDP.

Keywords: endogenous economic growth, fiscal regime, three-sector economy, path simulation, public capital, balanced growth path
JEL Classification:
C15, C61, E62