Abstract
Public spending as an important component of the composition of GDP has an impact on economic growth and development. The main purpose of this paper is to analyze the effects of disaggregated public expenditures, to measure the impact of current expenditures, transfers and subsidies, and capital expenditures as part of total government expenditures on economic growth and development of the Republic of Kosovo. To achieve the main goal of the paper was used the multiple linear regression model (OLS) and Pearson. The regression model has been modified and adapted to measure the regression of public spending on economic growth in Kosovo. The data used in the paper are secondary and collected from the Ministry of Finance of Kosovo, Agency of Statistics, and the Tax Administration of Kosovo. Data processing was done with SPSS. The results of the analysis show that the trend of Kosovo public spending for the analyzed period is increasing. According to Pearson correlation analysis, the results show that current public spending; transfers, and subsidies have a strong positive correlation to Gross Domestic Product. Whereas capital (investment) expenditures have a weaker positive correlation with GDP. The results of OLS regression, in our case, did not show the significance of independent variables, which means that the pubic expenses do not have an impact on economic growth in Kosovo.
Highlights
Effects or impact of public spending on economic growth and development, have always been and continued to be well nowadays an issue that has attracted the attention of researchers, economists, and policy-makers
The data presented in Graph. 1 show that the Gross Domestic Product (GDP) trend for the analyzed period is not linear but with increasing and decreasing growth in the margins 4.49% 1.22% respectively, this oscillation is a consequence of some specific factors that have influenced in different years, such as the financial crisis of 2008 was reflected in the slowdown in the economic growth of Kosovo, the economy of Kosovo is not so much exposed to foreign economies severely affected by the financial crisis
In the structure of public expenditures, capital expenditures have been a key element of the fiscal policy of the Government of the Republic of Kosovo since independence (2008), government authorities have applied a fiscal policy that favors public investment, especially in infrastructure to support economic growth in the country
Summary
Effects or impact of public spending on economic growth and development, have always been and continued to be well nowadays an issue that has attracted the attention of researchers, economists, and policy-makers. The task of the state is to ensure that level of aggregate demand will correspond to the level of national income during full employment. Fiscal policy in this sense must be adapted to the need to create additional investment demand and consumer demand, with the help of public policy and increased government spending. Strengthening aggregate demand with monetary and fiscal activities even above the level of real income. This may trigger inflationary trends, Keynes believes that, if inflation is kept in check, it cannot affect financial stability
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