Original scientific paper
https://doi.org/10.18045/zbefri.2022.1.29
Economic growth in the Central East European Union and the Western Balkan countries in the course of Stability and Growth Pact and COVID-19
Bardhyl Dauti
orcid.org/0000-0001-8372-9443
Shiret Elezi
Abstract
This research aims to provide an empirical assessment of the relationship between
fiscal policy sustainability factors, like fiscal deficit and economic growth in the
Western Balkan countries and East European Union Countries, using panel-level
data for the yearly time span from 2000-2021. The empirical model provides the
impact of fiscal deficit, alongside other control variables like inflation, schooling,
total investments, trade openness, and output gap on economic growth in the
selected group of countries. For the purpose of research, we employed Static and
dynamic panel estimation techniques like Fixed Effects with Driscol and Kraay
standard errors and system GMM. The findings confirm that fiscal deficit has
significantly affected the growth level in both groups of countries. In addition,
when the fiscal deficit has interacted with the COVID-19 dummy, it appears as a
growth-enhancing factor. However, when the fiscal deficit interacts with the
Eurozone debt crisis period, it becomes a growth-deteriorating factor. Other
control variables like inflation, trade openness, total investments, and the output
gap are found important factors in explaining the growth performance of the
Central East European and Western Balkan countries.
Keywords
growth; fiscal policy; GDP; Western Balkan countries; public finances
Hrčak ID:
279904
URI
Publication date:
30.6.2022.
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