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Fiscal policy and growth in new member states of the EU: a panel data analysis

Author

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  • Martina Dalic

    (Zagreb School of Economics and Management, Zagreb, Croatia)

Abstract

Fiscal policy can have positive effects on economic growth through changes in the structure of total expenditure, i.e. reductions in unproductive or current expenditure, lower taxes, and higher government investment - provided that it is offset by a decrease in unproductive expenditure. Such changes reduce the size of government, which positively affects output growth. Lower volatility of government investment expenditure is also growth-enhancing. However, the strongest growth effects are found for improvements in the fiscal balance, in particular if achieved by a reduction in the size of government expenditure. This suggests that a cautious fiscal policy stance may be the best way to improve growth.

Suggested Citation

  • Martina Dalic, 2013. "Fiscal policy and growth in new member states of the EU: a panel data analysis," Financial Theory and Practice, Institute of Public Finance, vol. 37(4), pages 335-360.
    • Handle: RePEc:ipf:finteo:v:37:y:2013:i:4:p:335-360
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    Citations

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    Cited by:

    1. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    2. Awaworyi Churchill Sefa & Ugur Mehmet & Yew Siew Ling, 2017. "Government education expenditures and economic growth: a meta-analysis," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(2), pages 1-17, June.
    3. Awaworyi Churchill, Sefa & Yew, Siew Ling & Ugur, Mehmet, 2015. "Effects of Government Education and Health Expenditures on Economic Growth: A Meta-analysis," EconStor Preprints 110901, ZBW - Leibniz Information Centre for Economics.

    More about this item

    Keywords

    growth; productive expenditure; distortionary taxation; volatility; fiscal balance;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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