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Quality of Public Finance and Economic Growth in the Czech Republic

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  • Irena Szarowská

    (Department of Finance and Accounting, School of Business Administration, Silesian University)

Abstract

Quality of public finances belongs to a key policy challenge as its improvement should lead to a long-term economic growth. The aim of the paper is to investigate if the key channels and tools used by the public finance (structure of revenue system, size of the government and composition of expenditure, level and sustainability of fiscal position) affect economic growth in the Czech Republic in the period 1995-2013. The empirical model is based on the methodology of Barro and Sala-i-Martin (2003) and the model of Mankiw et al. (1992) which is adapted to the framework of this study. The results of dynamic regressions suggest that economic growth is affected by public finance variables only partly and traditional sources of economic growth (human capital or openness) play bigger role. Provided evidence shows that total tax burden as well as the structure of revenue system (especially implicit tax rates on labour and consumption) should be primarily used as tools for maintain macroeconomic objectives. On the contrary, changes in size and composition of expenditure, balance and debt report not statistically significant impact.

Suggested Citation

  • Irena Szarowská, 2016. "Quality of Public Finance and Economic Growth in the Czech Republic," Working Papers 0030, Silesian University, School of Business Administration.
    • Handle: RePEc:opa:wpaper:0030
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    More about this item

    Keywords

    corporate income tax rates; global economy; tax competition; tax coordination and harmonization;
    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
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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