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Fiscal discipline and economic growth – the case of Romania

Author

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  • Ionut Dumitru

    (Faculty of Finance and Banking, Bucharest University of Economics)

  • Razvan Stanca

Abstract

The fiscal and budgetary policy should play a key role to alleviate the impact of the business cycle on the real economy. Procyclical fiscal policy is particularly undesirable in developing countries, as it not only exacerbates the business cycle, but also the high output volatility hurts the poorest people with low safety net. This paper assesses the structural budget deficit in Romania during 2000- 2009 and evaluates the role of the fiscal policy during the business cycle. The paper concludes that the fiscal policy in Romania was highly procyclical, exacerbating the economic cycle. In order to escape from this procyclicality, Romania needs deep structural reforms in order to restore the sustainability of the public finances and put Romania on a sustainable growth path.

Suggested Citation

  • Ionut Dumitru & Razvan Stanca, 2011. "Fiscal discipline and economic growth – the case of Romania," Advances in Economic and Financial Research - DOFIN Working Paper Series 50, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.
  • Handle: RePEc:cab:wpaefr:50
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    Cited by:

    1. Stanova, Nadja, 2015. "Fiscal discretion, growth and output volatility in new EU member countries," MPRA Paper 63946, University Library of Munich, Germany.
    2. Daianu, Daniel & Kallai, Ella & Lungu, Laurian, 2012. "Tax Policy under the Curse of Low Revenues: The Case of Romania (Part II)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 143-162, June.
    3. Evans, Olaniyi, 2020. "Fiscal Discipline, Financial Development & Economic Growth in Nigeria," MPRA Paper 99242, University Library of Munich, Germany.
    4. Mariana Luminita LINTA & Carmen Mihaela MOGOIU, 2018. "The Evolution Of The Governmental Revenue Collection In Argeª County- The Impact Of The Legislative Changes In The Fiscal Field," Scientific Bulletin - Economic Sciences, University of Pitesti, vol. 17(3), pages 69-76.

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    More about this item

    Keywords

    structural budget balance; procyclicality of fiscal policy; fiscal discipline;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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