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Long Run Growth Effects of Fiscal Policy - a Case Study of Hungary

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  • Adrienn Erős

    () (University of Miskolc)

Abstract

One of the most debated questions of economics is whether the pace of long run economic growth can be influenced by economic policies. The (long run) steady state growth rate of the economy is determined by two exogenous factors according to neoclassical theory. But Endogenous growth theories support the view that (among other factors) fiscal policy can affect economic growth through several channels, some of which can give positive, while others negative impulses to the rate of growth. The paper deals with the long run growth effects of fiscal policy in Hungary, emphasising that restrictive fiscal policy actions can still have a beneficial effect on the long run growth rate of the economy, founding such growth-oriented actions in the future, which could not have been taken without the earlier stabilisation. An outstanding growth-fastening effect is the lesson we can learn from comparing the fiscal data of the 1994-1996period with the 2003-2005 data.

Suggested Citation

  • Adrienn Erős, 2010. "Long Run Growth Effects of Fiscal Policy - a Case Study of Hungary," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 5(01), pages 11-17.
  • Handle: RePEc:mic:tmpjrn:v:5:y:2010:i:01:p:11-17
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    File URL: http://tmp.gtk.uni-miskolc.hu/volumes/2010/01/TMP_2010_01_02.pdf
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    1. Stephen M. Miller & Frank S. Russek, 1997. "Fiscal Structures and Economic Growth at the State and Local Level," Public Finance Review, , vol. 25(2), pages 213-237, March.
    2. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 259-280, July.
    3. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    4. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    5. Robert J. Barro & Xavier Sala-I-Martin, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 645-661.
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