Fiscal Policy and Economic Growth in EU countries: Evidence from Panel Data with Budget Constraints
| Authors | |
|---|---|
| Year of publication | 2015 |
| Type | Article in Proceedings |
| Conference | Proceedings of 33th International Conference Mathematical Methods in Economics 2015 |
| MU Faculty or unit | |
| Citation | |
| Web | Conference Proceedings |
| Field | Economy |
| Keywords | fiscal policy; economic growth; EU; panel data |
| Description | The aim of this paper is to find evidence whether fiscal policy can affect the economic growth based on the empirical research method. Focus is set on 25 se- lected member countries of the European Union. Annu al government finance data from years 1995 to 2012 are used for an empirical s tudy. Observed indicators are composition and volume of total government expendit ures and through budget con- strain also tax burden of individual taxes. These i ndicators are used within endoge- nous growth model together with capital stock and a pproximation of human capital. A panel regression with fixed effects is used as an analytic tool. Results show which composition of government expenditures is growth-fr iendly. Every policy maker must also take into consideration a trade-off betwe en an increase of public expendi- tures and raising taxes to achieve a balanced gover nment budget. For that reason impacts of various taxes on the economic growth wer e examined to find out which tax is strongly distortionary. Distrotionary taxes and unproductive govenment ex- penditues have a negative impact on growth, which i s consistent with results in other research articles. |
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