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Analyzing Fiscal Balance Evolution for Developed and Emerging Countries

Author

Listed:
  • Dinca Gheorghita

    () (Department of Finance and Accounting, Transilvania University of Brasov, Romania)

  • Dinca Marius Sorin

    () (Department of Finance and Accounting, Transilvania University of Brasov, Romania)

  • Popione Catalina

    () (Transilvania University of Brasov, Romania)

Abstract

The purpose of our paper is to analyze the main factors which influence fiscal balance’s evolution and thereby identify solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.

Suggested Citation

  • Dinca Gheorghita & Dinca Marius Sorin & Popione Catalina, 2016. "Analyzing Fiscal Balance Evolution for Developed and Emerging Countries," Scientific Annals of Economics and Business, Sciendo, vol. 63(3), pages 299-310, November.
  • Handle: RePEc:vrs:aicuec:v:63:y:2016:i:3:p:299-310:n:1
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    References listed on IDEAS

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    1. Jacopo Cimadomo, 2012. "Fiscal Policy in Real Time," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 440-465, June.
    2. Carlo Favero & Francesco Giavazzi & Jacopo Perego, 2011. "Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(4), pages 652-682, November.
    3. Daniel, Betty C. & Shiamptanis, Christos, 2013. "Pushing the limit? Fiscal policy in the European Monetary Union," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2307-2321.
    4. James M. Buchanan, 1962. "The relevance of Pareto optimality," Journal of Conflict Resolution, Peace Science Society (International), vol. 6(4), pages 341-354, December.
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    More about this item

    Keywords

    fiscal balance; public debt; economic growth; fiscal sustainability;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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