THE COMPARATIVE ANALYSIS OF ROMANIA’S BUDGET DEFICIT COMPARED TO THE EUROPEAN UNION MEMBER STATES

Rodica Gherghina, Ioana Duca and Postole Anca ()

Romanian Economic Business Review, 2010, vol. 5, issue 4, 143-155

Abstract: In their research, the authors started from the premise that, in an emerging economy, it is important that the fiscal, budget and monetary policy measures should keep the long-term indebtedness level constant, so that the amount of public debt should increase at the same rate as the nominal GDP. In this context, the monetary policy must have as main objective to control inflation, because the inflation rate directly influences the long-term nominal GDP growth rate. Yet, this monetary policy direction must be supervised permanently, because a high long-term inflation rate leads to an increase in the nominal GDP, contributing to the increase in the nominal interest rate. Besides, the monetary policy combined with the fiscal-budgetary policy must aim at covering the budget deficits and at decreasing the public debt. In our opinion, chronic budget deficits and a high public debt level have a negative impact on economic growth. Consequently, the two budget indicators must be analysed in correlation with the GDP. We consider that both Romania as a European Union member state, and the other member states must permanently revise, through specific procedures, the budget deficit level in relation to the GDP and the indebtedness level.

Keywords: budget deficit; public debt; inflation rate; nominal GDP (search for similar items in EconPapers)
Date: 2010
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