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Fiscal discipline and economic growth – the case of Romania

  • Dumitru, Ionut
  • Stanca, Razvan

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.

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File URL: https://mpra.ub.uni-muenchen.de/27300/1/MPRA_paper_27300.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27300.

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Date of creation: 24 Oct 2010
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Handle: RePEc:pra:mprapa:27300
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