Budget spending and economic growth in Croatia Dynamics and relathionships over the past two decades

Ivo Sever (), Sasa Drezgic () and Helena Blazic
Additional contact information
Ivo Sever: Scientific advisor (ret.), Zagreb, Croatia
Helena Blazic: University of Rijeka, Faculty of Economics, Rijeka, Croatia

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2011, vol. 29, issue 2, 291-331

Abstract: The objective of this research is to analyze the relationship between government budget spending and the effect on the growth and structure of the GDP of Croatia during the past two decades. The starting working assumption (hypothesis) is that the volume of total budget expenditure (including the foreign borrowing) has not been realizing appropriate effect on GDP growth. In the analysis of these relationships we primarily use the method of vector autoregressions (VAR). The main result of the analysis showed that, in accordance with theoretical assumptions, the structure of expenditures is essential for the effects of budgetary spending on economic growth. We determine the positive effects of investment spending and purchases of goods and services and the negative effects of other categories of current spending. The reduction of capital expenditures during the recession presents a particularly adverse trend, which reduces the rate of growth of the economy in the long and short term. A fundamental conclusion of the research is that the budget expenditures have not adequately affected the GDP growth. Therefore, it is possible to affect the economic growth by changing the structure of budgetary spending, as well as directing public borrowing to investment financing.

Keywords: budget spending; gross domestic product; vector autoregression; structure of expenditures; public debt; Croatia (search for similar items in EconPapers)
JEL-codes: E60 H50 H60 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.efri.uniri.hr/sites/efri.hr/files/cr-collections/2/29-2-sever.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rfe:zbefri:v:29:y:2011:i:2:p:291-331

Access Statistics for this article

More articles in Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics from University of Rijeka, Faculty of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Danijela Ujcic ().