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The Stabilizing Role of Fiscal Policy: Theoretical Background and Empirical Evidence

Author

Listed:
  • Vladimir Vladimirov

    (University of Economics)

  • Maria Neicheva

    (Burgas Free University)

Abstract

Тhе study sheds light on the stabilizing role of government budget. It finds that in Bulgaria both taxes and government spending are negatively related to the real growth rate. This leads to the conclusion that budgetary expenditure influence output in a non-Keynesian fashion. The size of discretionary fiscal impulse is the main determinant of the non-Keynesian outcome. The results imply that although the balanced budget ensures the sustainability of public finances, it does not guarantee a growth-stimulating effect in case of a large government sector. Abstention from an active fiscal policy would allow the automatic stabilizers to operate freely and to counteract the negative shocks to the economy.

Suggested Citation

  • Vladimir Vladimirov & Maria Neicheva, 2008. "The Stabilizing Role of Fiscal Policy: Theoretical Background and Empirical Evidence," IBSU Scientific Journal, International Black Sea University, vol. 2(1), pages 7-22.
    • Handle: RePEc:ibl:journl:v:2:y:2008:i:1:p:7-22
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    File URL: https://journal.ibsu.edu.ge/index.php/ibsusj/article/download/30/32
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    References listed on IDEAS

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    1. Joanna Siwinska & Piotr Bujak, 2006. "The Short-Run Macroeconomic Effects of Discretionary Fiscal Policy Changes," Springer Books, in: Marek Dabrowski & Jacek Rostowski (ed.), The Eastern Enlargement of the Eurozone, chapter 0, pages 131-145, Springer.
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    5. Rzońca, Andrzej & Ciżkowicz, Piotr, 2005. "Non-Keynesian effects of fiscal contraction in new member states," Working Paper Series 519, European Central Bank.
    6. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
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    Cited by:

    1. Ibrar Hussain & Jawad Hussain & Arshad Ali & Shabir Ahmad, 2021. "A Dynamic Analysis of the Impact of Fiscal Adjustment on Economic Growth: Evidence From Pakistan," SAGE Open, , vol. 11(2), pages 21582440211, June.
    2. Herbert W. V. Hasudungan & Sulthon S. Sabaruddin, 2016. "The Impact of Fiscal Reform on Indonesian Macroeconomy: A CGE Framework," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 8(3), pages 181-202, September.
    3. Kashif Munir & Nimra Riaz, 2019. "Fiscal Policy and Macroecomonic Stability in South Asian Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 228(1), pages 13-33, March.

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    More about this item

    Keywords

    government budget; stabilizing fiscal policy; Keynesian vs. non-Keynesian effects;
    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

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