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

Authors

  • Vladimir Vladimirov University of Economics - Varna
  • Maria Neicheva Burgas Free University

Keywords:

government budget, stabilizing fiscal policy, Keynesian vs. non-Keynesian effects

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.

Author Biographies

Vladimir Vladimirov, University of Economics - Varna

Associate Professor in Economics; Department of General Economic Theory

Maria Neicheva, Burgas Free University

Faculty of Business Studies Chief Assistant Professor in Economics

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Published

2008-05-08

Issue

Vol. 2 No. 1 (2008)

Section

Legal and Social Sciences, Economics

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