Fiscal Policy: Germany and the Czech Republic Amidst the COVID-19 Crisis

This thesis examines the effectiveness of fiscal policy responses during the COVID-19 crisis in Germany and the Czech Republic, focusing on their ability to stabilise GDP growth, unemployment, and inflation. The analysis combines a qualitative comparative approach based on the Seven Key Characteristics of effective fiscal policy with quantitative methods, including Keynesian multiplier benchmarks and time-series regression analysis. The results indicate that fiscal policy played a significant stabilising role in both countries, although its effectiveness differed across instruments and macroeconomic indicators. Tax policy measures are associated with modest positive effects on GDP growth but show no statistically significant impact on inflation or unemployment. In contrast, government spending measures demonstrate stronger and more consistent effects. In Germany, spending is significantly associated with GDP growth, while in the Czech Republic, it is more closely linked to labour market stabilisation. The findings highlight the importance of policy composition, fiscal capacity, and structural economic characteristics. Overall, the results support Keynesian theory, suggesting that government spending is more effective than tax-based measures in stabilising economic activity during crises.