The Effect of Government Expenditures on Economic Growth. the Case of Albania

Abstract

One of the main issues of economic policy and government is to ensure a sustainable economic growth of a country.Economic growth has been at the center of every government in place since at least year 2000.Though for this teen-year ,growth values were satisfactory in Albania, the macroeconomic situation changed in 2009,when appeared the elements of the global crisis. Economic global crisis has awakened interest in the case of fiscal policy.Fiscal policy and monetary policy as well, are two basci components of state economic policy which are used for macroeconomic purposes:influence of gross domestic product, the level of enmployment, income and price level. The two main instruments of fiscal policy are government expenditures and taxes. Government expenditures are considered as the most powerful weapon available to fiscal policy makers, especially in developing countries such as Albania. During the last century , governments have spent more and more in relation to their national income. This increase in government spending can be explained by the impact that this variable can have on the economic growth of a country? In fact ,about the connection between the government spending and the economic growth of a country various studies seem full of contradictions.This conflict is explained by changes in terms of definitions and from the differencies of the various countries included in these studies. The objective of this study is to give an appropriate answer to the question : Can government spending have the potential to impact and stimulate economic growth? How the changes of the size of the fiscal policy instruments have affected indicators of economic growth in Albania? This article will focus on the role that the fiscal policy has on economic growth , especially in our country, reviewing economic growth theories, debates about the effectiveness of fiscal policy , and active fiscal policy. Finally some suggestions for the future addressing the government expenditures towards priority sectors.