Economic Review, Vol. 74 No. 2, 2023.
Review article
https://doi.org/10.32910/ep.74.2.3
FISCAL CONSOLIDATION AND ECONOMIC GROWTH IN POST-TRANSITION EU COUNTRIES: DESCRIPTIVE ANALYSIS
Paško Burnać
Josip Visković
Nikša Nikolić
Abstract
Concerns about sustainability of public finances during global economic crisis in 2008 resulted in stronger implementation of fiscal consolidation measures. The literature does not offer a consensus on the impact of these measures. Empirical research offers a rationale for both contractionary and expansionary effect of fiscal consolidation on economic activity. Studies that examine the macroeconomic and fiscal effects of consolidation in developed countries are neither frequent nor have a long history, while the same effects in the post-transition countries are un-investigated. This paper tries to shed some light on this relationship. The research results do not support the expansionary fiscal consolidation hypothesis. Therefore, descriptive analysis suggests that, apart from minor corrections of current account of the balance of payment and lower labor costs, fiscal consolidation in post-transition countries did not achieve declared goals such as economic growth. The results of the analysis have to be observed with caution. Namely, this research did not include an econometric estimate of the effects of fiscal consolidation, which would take into consideration other factors (control variables) that affect the observed fiscal and macroeconomic variables.
Keywords
fiscal consolidation; economic growth; descriptive analysis; post-transition countries
Hrčak ID:
296764
URI
Publication date:
31.3.2023.
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