Abstract
The Great Recession has imposed vital limitations on the policy maker’s ability to react to further economic challenges. In this article, the authors set a purpose to assess the expediency and the size of fiscal consolidation or expansionary measures for countries with emerging markets depending on economic dynamics. The data on the episodes of large changes in fiscal policy, representing both fiscal stimuli and consolidation in Ukraine and in the EU countries with emerging market economies from 2001 to 2017, were evaluated. The authors examined the main reasons of fiscal policy’s volatility and its impact on economic growth. The countries with low and medium level of institutional framework for fiscal policy formulation could face permanent deficit and public debt problem. Episodes of expansionary fiscal adjustments based on government revenues cuts and spending increases were more effective compared with those that were entirely based on spending increases. Empirical investigation showed that successful fiscal consolidation measures obligatory included the government primary spending reduction. In those cases, the budget deficit-to-GDP and public debt-to-GDP ratios were declined. Medium-term priorities to develop the methodical bases of fiscal policy design were justified.
Highlights
Fiscal policy was quite often used as a tool to ensure financial stability and to force economic growth
Episodes of expansionary fiscal adjustments based on government revenues cuts and spending increases were more effective compared with those that were entirely based on spending increases
The transition to the active role of the fact that the fiscal policy’s effect on econom- that policy as a countercyclical tool in order to ic growth has varied considerably
Summary
Fiscal policy was quite often used as a tool to ensure financial stability and to force economic growth. It was macroeconomic stabilization instrument, espe- concluded that (in certain situations) the increase cially when it was closely coordinated with both in the public debt has been followed by the higher monetary regulation and other components of fi- real GDP growth rates. Idrisov and shocks in taxes and government spending) on the Sinelnikov-Muriliev (2013) showed that the posdynamics of economic growth in the USA in the sibilities for fiscal policy in the field of economic postwar period They found that positive shocks stimulation were limited. The transition to the active role of the fact that the fiscal policy’s effect on econom- that policy as a countercyclical tool in order to ic growth has varied considerably (depending on increase its effectiveness was recommended by the public debt-to-GDP ratio).
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.