MACROECONOMICS EFFECT OF FISCAL POLICY IN TRANSITION ECONOMIES: THE CASE REPUBLIC OF MACEDONIA
Besnik Fetai, Selajdin Abduli
Pages: 1035-1047
Published: 29 Aug 2014
Views: 3,815
Downloads: 881
Abstract: The objective of this paper is to investigate the effect of fiscal policy in small open transition economy. This paper employs, Granger- Causality test, Impulse Response Function and Forecast Error Decomposition, in order to assess the impact of fiscal policy on real GDP and prices. In this finding, all econometrics result do not show a conventional Keynesian effect of fiscal policy on real economic activity due to the counteracting effect of the monetary policy reaction. This causes a crowding out effect. Therefore, the results suggest that there is no coordination between fiscal and monetary policy. Moreover, the results from the Granger Causality test and Impulse Response Function show that the best fiscal policy for stimulating the economy appears to be one of tax-cuts. However, a change in taxation may produce a short-lived effect on real GDP; but, such action is likely to generate higher burdens in the future. In addition, the higher burdens are likely to have long-term consequences that far outweigh any short-term benefits in terms of real GDP.
Keywords: fiscal policy, economic growth, transition economies, granger – causality test, structural vector autoregressive
Cite this article: Besnik Fetai, Selajdin Abduli. MACROECONOMICS EFFECT OF FISCAL POLICY IN TRANSITION ECONOMIES: THE CASE REPUBLIC OF MACEDONIA. Journal of International Scientific Publications: Economy & Business 8, 1035-1047 (2014). https://www.scientific-publications.net/en/article/1000458/
Back to the contents of the volume
© 2025 The Author(s). This is an open access article distributed under the terms of the
Creative Commons Attribution License https://creativecommons.org/licenses/by/4.0/, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. This permission does not cover any third party copyrighted material which may appear in the work requested.
Disclaimer: The Publisher and/or the editor(s) are not responsible for the statements, opinions, and data contained in any published works. These are solely the views of the individual author(s) and contributor(s). The Publisher and/or the editor(s) disclaim any liability for injury to individuals or property arising from the ideas, methods, instructions, or products mentioned in the content.