Government Spending Effectiveness and The Quality of Fiscal Institutions

Aygun Garayeva and Gulzar Tahirova

No 1605, Working Papers from 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.

Keywords: Fiscal policy; Procyclicality; Institutional quality; Panel data (search for similar items in EconPapers)
JEL-codes: D73 E02 E32 E62 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-07-07
New Economics Papers: this item is included in nep-cis and nep-mac
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Citations: View citations in EconPapers (3)

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Working Paper: Government spending effectiveness and the quality of fiscal institutions (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:aze:wpaper:1605

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