Heterogeneity of households and the effects of fiscal policy in CEE countries

We analyse the effects of fiscal policy in non-EMU Central and Eastern European counties. The analysis is based on new Keynesian model, which takes into account both optimizing Ricardian households and non-Ricardian households with liquidity constraints. Results of the study indicate that the share of non-Ricardians has significant impact on fiscal multipliers. The government spending multiplier reaches 3 in the country with highest share of non- Ricardian households, whereas in the country with lowest share of non-Ricardians is lower than one. Also effects of government spending shocks on consumption are very sensitive to the share of households with liquidity constraints.National Science Centre, Poland (within research project DEC-2014/15/B/HS4/01996)