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Fiscal policy and economic growth: the case of Albania

Author

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  • Shijaku, Gerti
  • Gjokuta, Arlind

Abstract

This discussion material analysis the effects of fiscal policy on the economic growth in the case of a small open developing country, Albania, by employing an endogenous growth model on a GMM approach. The results obtained show that government revenue policies has a higher effect on economic growth than those on government expenditure. The impact of revenue and expenditure on growth were analysed by categorising tax revenue into distortionary and non-distortionary, whilst government expenditure were divided into productive and non-productive. Under such composition we found that revenue sub-categories reduce growth, while distortionary taxation has much larger and statistically significant effect. Besides, the parameter values show that growth is effected positively by productive expenditure and negatively by non-productive. Also, this paper analysis the impact of public debt on growth and finds that the size of public debt is negatively related to growth rate.

Suggested Citation

  • Shijaku, Gerti & Gjokuta, Arlind, 2013. "Fiscal policy and economic growth: the case of Albania," MPRA Paper 79090, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79090
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    References listed on IDEAS

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    6. Mr. Rodolphe Blavy, 2006. "Public Debt and Productivity: The Difficult Quest for Growth in Jamaica," IMF Working Papers 2006/235, International Monetary Fund.
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    11. Shijaku, Gerti, 2012. "Sustainability of fiscal policy: the case of Albania," MPRA Paper 79089, University Library of Munich, Germany.
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    Cited by:

    1. Mico Apostolov & Dusko Josevski, 2016. "Aggregate Demand–Inflation Adjustment Model Applied to Southeast European Economies," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 5(1), pages 141-157.
    2. Nursini Nursini, 2017. "Effect of Fiscal Policy and Trade Openness on Economic Growth in Indonesia: 1990-2015," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 358-364.
    3. Josheski, Dushko, 2014. "Keynesian macroeconomics without the LM curve: IS-MP-IA model and Taylor rule applied to some CESEE economies," EconStor Preprints 92955, ZBW - Leibniz Information Centre for Economics.
    4. Josheski Dushko & Eftimoski Dimitar, 2016. "Application of Is-Mp-Ia Model and Taylor Rule to Cesee Economies," Economics and Culture, Sciendo, vol. 13(1), pages 5-13, June.

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    More about this item

    Keywords

    Fiscal policy; economic growth; public debt and GMM approach;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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