Impact of the fiscal policy on economic growth: an analytical approach from the Republic of Kosovo

Abstract

The aim of the paper is to analyses the impact of fiscal policy on economic growth in the Republic of Kosovo for the period after its independence. In this regard, several models and techniques have been used in order to test the impact of fiscal policy on economic growth in the Republic of Kosovo for the period 2006-2016, using a series of monthly timetables. In addition, initial estimates were used to determine the time lag based on three main criteria such as AIC, HQIC and SBIC, and time series were also tested for stationarity by applying augmented Dickey Fuller and Phillips Perron. Then VAR model was applied unlimited or just known as VAR. In addition, for the purpose of analysing the causal link between public expenditure and revenue in Kosovo for the period 2006-2016, the Granger test of causality has been applied. Moreover, the results show that there is a positive and significant link between public spending and economic growth, but on the other hand the link between public revenue and economic growth is positive but not significant. Regarding the causal link between expenditure and public revenues, the results testify that there is a two-way correlation between them, assuming the hypothesis of fiscal synchronisation.