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Government Spending Effectiveness and The Quality of Fiscal Institutions

Author

Listed:
  • Aygun Garayeva

    (Central Bank of Azerbaijan Republic)

  • Gulzar Tahirova

    (Central Bank of Azerbaijan Republic)

Abstract

This paper examines the impact of the quality of fiscal institutions on the effectiveness of government expenditures. The cyclical behavior of government spending and output is used as a proxy for the effectiveness of public spending, and fiscal policy is considered to be effective, if it is countercyclical. Empirical estimation is conducted using panel data fixed effects method, for the yearly time period of 1996-2013, in the sample of 45 countries. Countries are divided between 3 groups of countries – Western European, Eastern European and CIS countries – with each one of these groups representing a different development stage, to find out whether the determinants of public spending efficiency differ between countries in different development stages. The main result of the empirical research is that in developed countries the main determinants of government spending effectiveness are found to be the quality of economic institutions, but access to financial markets is more pronounced in developing countries.

Suggested Citation

  • Aygun Garayeva & Gulzar Tahirova, 2016. "Government Spending Effectiveness and The Quality of Fiscal Institutions," Working Papers 1605, Central Bank of Azerbaijan Republic.
  • Handle: RePEc:aze:wpaper:1605
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    References listed on IDEAS

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    Cited by:

    1. Duy-Tung Bui, 2018. "Fiscal policy and national saving in emerging Asia: challenge or opportunity?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 305-322, August.

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    More about this item

    Keywords

    Fiscal policy; Procyclicality; Institutional quality; Panel data;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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