The Stabilizing Role of Fiscal Policy: Theoretical Background and Empirical Evidence

Vladimir Vladimirov () and Maria Neicheva ()
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Vladimir Vladimirov: University of Economics
Maria Neicheva: Burgas Free University
Authors registered in the RePEc Author Service: Mariya Neycheva

IBSU Scientific Journal, 2008, vol. 2, issue 1, 7-22

Abstract: Тhе study sheds light on the stabilizing role of government budget. It finds that in Bulgaria both taxes and government spending are negatively related to the real growth rate. This leads to the conclusion that budgetary expenditure influence output in a non-Keynesian fashion. The size of discretionary fiscal impulse is the main determinant of the non-Keynesian outcome. The results imply that although the balanced budget ensures the sustainability of public finances, it does not guarantee a growth-stimulating effect in case of a large government sector. Abstention from an active fiscal policy would allow the automatic stabilizers to operate freely and to counteract the negative shocks to the economy.

Keywords: government budget; stabilizing fiscal policy; Keynesian vs. non-Keynesian effects (search for similar items in EconPapers)
JEL-codes: E62 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ibl:journl:v:2:y:2008:i:1:p:7-22

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