<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The purpose of this paper is to examine the impacts of the real exchange rate, the government deficit and other relevant variables on aggregate output in Slovenia. Few of the previous studies have applied the AD/AS model to examine the impacts of major macroeconomic variables on aggregate output. This paper makes contributions to the literature by applying a rigorous model to examine how real GDP is affected by the real exchange rate, fiscal policy and other related variables. The exponential GARCH model is applied in empirical work. The paper finds that real depreciation of the Euro may affect Slovenia’s aggregate output positively or negatively and that more central government deficit as a percent of GDP does not affect aggregate output. In addition, Slovenia’s aggregate output is positively associated with the real stock price, the real oil price and real total labor cost or wage and is negatively influenced by the real lending rate and the expected inflation rate. Recent real depreciation of the Euro would help Slovenia’s aggregate output whereas expansionary fiscal policy would not be effective in stimulating the economy.</p></abstract>

The purpose of this paper is to examine the impacts of the real exchange rate, the government deficit and other relevant variables on aggregate output in Slovenia. Few of the previous studies have applied the AD/AS model to examine the impacts of major macroeconomic variables on aggregate output. This paper makes contributions to the literature by applying a rigorous model to examine how real GDP is affected by the real exchange rate, fiscal policy and other related variables. The exponential GARCH model is applied in empirical work. The paper finds that real depreciation of the Euro may affect Slovenia’s aggregate output positively or negatively and that more central government deficit as a percent of GDP does not affect aggregate output. In addition, Slovenia’s aggregate output is positively associated with the real stock price, the real oil price and real total labor cost or wage and is negatively influenced by the real lending rate and the expected inflation rate. Recent real depreciation of the Euro would help Slovenia’s aggregate output whereas expansionary fiscal policy would not be effective in stimulating the economy.

Is Real Depreciation or More Government Deficit Expansionary? The Case of Slovenia

Department of Management & Business Administration, College of Business

South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The purpose of this paper is to examine the impacts of the real exchange rate, the government deficit and other relevant variables on aggregate output in...

Is Real Depreciation or More Government Deficit Expansionary? The Case of Slovenia

Published Online: Jul 06, 2017

Page range: 50 - 56

DOI: https://doi.org/10.1515/jeb-2017-0005

Keywords
exchange rates, government deficits, interest rates, stock prices, labor cost

© 2017 South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Is Real Depreciation or More Government Deficit Expansionary? The Case of Slovenia

Published Online: Jul 06, 2017

Page range: 50 - 56

DOI: https://doi.org/10.1515/jeb-2017-0005

Keywordsexchange rates, government deficits, interest rates, stock prices, labor cost

© 2017 South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
exchange rates, government deficits, interest rates, stock prices, labor cost