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.