Analysis of Short-Run Output Fluctuations in Poland and Policy Implications

Applying a general equilibrium approach, this paper examines output fluctuations in Poland and finds that real output is negatively influenced by the deficit/GDP ratio, the euro interest rate, the expected inflation rate, and country risk and positively affected by real quantity of money and real appreciation. Policy implications are that expansionary fiscal policy would not generate expected outcomes, that the conventional approach of devaluating a currency would not apply to Poland, and that a stable political, fiscal and financial environment would reduce country risk and help raise output.