Preliminary communication
https://doi.org/10.18045/zbefri.2020.2.653
The relationship between fiscal policy and economic growth in CEE countries
Sabina Hodžić
orcid.org/0000-0002-4202-3548
; University of Rijeka, Faculty of Tourism and Hospitality Management, Croatia
Amer Demirović
; Universiti Teknologi Brunei, School of Applied Sciences and Mathematics, Jalan Tungku Link, Brunei Darussalam
Emira Bečić
; Statistical consultant at GOPA Consultants, b, Croatia
Abstract
The relationship and effects between fiscal policy and economic growth have been an important theoretical and empirical research topic. The neoclassical models imply that the economic effects of changes in government spending will be neutralised by the impact of consequent changes in private spending. Endogenous growth models, on the other hand, imply that changes in the level and composition of taxation and government expenditure can affect economic growth. This aim of the paper is to explore the relationship and effects of fiscal policy and economic growth in 21 Central and Eastern European (CEE) countries over the period 2000-2018. The results, after controlling for various common and country-specific variables, imply that an increase in taxation, but not in non-productive expenditures, can positively affect economic growth. Our main findings are: (i) there is a significant and positive contemporaneous relationship between the general level of taxation and economic growth; and (ii) there is no relationship between the government final consumption and economic growth. Therefore, our results contributed to the scientific literature by providing empirical evidence on the contemporaneous relationship between the general government tax receipt and economic growth in CEE countries.
Keywords
fiscal policy; economic growth; panel data analysis; Central and Eastern European countries
Hrčak ID:
249275
URI
Publication date:
30.12.2020.
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