Fiscal discipline and economic growth – the case of Romania

Ionut Dumitru () and Razvan Stanca

No 50, Advances in Economic and Financial Research - DOFIN Working Paper Series from Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB

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.

Keywords: structural budget balance; procyclicality of fiscal policy; fiscal discipline (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-mac and nep-tra
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Citations: View citations in EconPapers (2)

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http://www.dofin.ase.ro/carfib/wpaefr/wpaefr_50.pdf First version, 2011 (application/pdf)

Related works:
Working Paper: Fiscal discipline and economic growth – the case of Romania (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cab:wpaefr:50

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