H50 - National Government Expenditures and Related Policies: GeneralReturn

In the literature, it is still thought that to combat budget deficits, the state struggles to adjust the relationship between government revenues and spending. Accordingly, the causality relationship between government revenues and spending is generally explained through four main hypotheses: tax-spending, spending-tax, fiscal synchronization and institutional separation hypotheses. In addition to the doubt that the first and the only step in the fight against the budget deficit is government revenues and government expenditures, there are various uncertainties in the studies on this subject in the literature. There is no consensus on the subject due to the differences in methodological methods in previous studies, the inability to determine the macroeconomic size used to represent the revenue variable and differences in the revenue composition of countries. This situation causes the findings obtained from empirical studies in this field to vary and misleading policy recommendations to be made. For this reason, in this study, the causality relationship between government revenues, tax and spending data in the G7 countries for the period 1965-2021 is examined within the framework of two different models, using both time domain and frequency domain causality tests. We draw attention to the effect of differences in methodological methods on the results obtained. The complex results obtained, in addition to shedding empirical light on the complexity arising from the methodological methods available in the literature, also show that it is not healthy to explain studies on combating budget deficits only with the causality relationship between government revenues and spending or tax and spending.

In the contemporary times, with the major conflict of the Russo-Ukrainian War, the global economies are facing several challenges and disputes in various economic, energy, and financial sectors. Still, policymakers and scholars are concerned about exploring factors affecting greener energy. The present study examines the impact of research and development (R&D) budgets, financial globalization and socio-economic conditions on greener energy adoption. Besides, this study considers the role of internal and external conflicts on greener energy adoption in the "Emerging Seven" economies during the period 1990-2020. Using various diagnostic and cointegration tests, the results revealed the presence of cross-sectional dependence, heterogeneous slopes and a long-run equilibrium relationship. This study employes panel quantile regression and finds that R&D budgets, financial globalization, socio-economic conditions and internal and external conflicts significantly promote greener energy adoption. Still, the influence of socio-economic conditions is inconsistent across quantiles. Using the autoregressive distributed lag model as a robustness measure, this study validates the positive impact of variables on greener energy adoption, except external conflicts. However, all the variables adversely influence greener energy adoption in the short run. The empirical results also validate bidirectional and unidirectional causal associations of the variables. Following the results, this study recommends further enhancement in the R&D budgets and financial globalization and limiting conflicts in emerging economies.

The relationship between government size and economic growth is a major task in the economic literature and this paper is devoted to public expenditure. We empirically study the relationship between public expenditure and economic growth in the European Union. Our approach consists on a quantile regression for the period 2004-2019. The results show a negative and significant impact of total public expenditure on economic growth, with a higher effect in the high tail of the growth distribution. In a more detailed analysis, the study of three large public expenditures, considering the percentage of total public expense, reveals an insignificant effect of health, and a negative impact of education and social protection, higher in the low tail of the growth distribution. Our findings allow better understanding of the effects of public policies on development beyond linear approaches.

The present paper deals with the impact of supranational fiscal rules on economic growth through optimal government size and the BARS curve in monetary unions. Monetary unions introduce supranational fiscal rules to ensure fiscal sustainability of public finance and to eliminate the presence of free-riders in these country groupings. The main objective of the paper is therefore to illustrate how compliance with the supranational fiscal rules affects the level of economic growth under the conditions of the existence of the BARS curve in monetary unions. The paper confirms the existence of the BARS curve. It makes a quantification of the optimal government size in the East African Monetary Union (26.96% of GDP) and a subsequent identification of years when supranational fiscal rules prevented increase in public expenditures via debt financing and thus counteracted the decline in economic growth.

The aim of this paper is to find a long-term relationship between the economic growth and the size of government. Four different characteristics are used to measure the government size. Total public expenditures, total tax revenues, fi nal government consumption and share of compensation of public workers to overall spending. There are also added control variables and time dummy variable to prevent biased results. The analysis was performed on data from 30 OECD countries from years 1995-2014. Fixed-eff ects panel regression was used to determine relationship between these individual indicators of government size and the economic growth. Main findings of this paper are that change in all indicators is negatively correlated with the growth. Especially in case of final government consumption which indicated the strongest negative relationship.

The Influence of Fiscal Deficit Creation on Economic Growth The discussion of influence of fiscal consolidation on economic growth is quite interesting and important topic. Consequently, the main aim of the article is to determine differences within the influence of fiscal deficit on the economic growth, which is caused by changes in certain groups of government expenditures and revenues. We focus on two different economic growth indicators. The first is growth rate of real GDP and the second is growth rate of potential output. The panel regression method is used which data covers 13 old EU member states in 1996 to 2013. We employ the omitted fiscal variable approach. There is a hint that every defi cit to revenue substitution has no significant growth effect. The results of expenditures imply, that government should reduce deficit created by debt service. The measure has relatively stronger effect on supply side. Potential output growth can also be supported by the deficit decrease of social expenditures. Lowering government consumption is detrimental to GDP, but it is not to potential output. There are some differences between results of two types of growth. Hence government should decide, if consolidation effect is considered against GDP or potential output at first.

The article deals with the issue of fiscal sustainability, which has gained in importance after the recent financial and sovereign debt crisis. The article defi nes the term of financial sustainability in its theoretical part. The next section continues with the historical fiscal data for countries in the European Union. The main part of the article estimates reaction function of fiscal policy using panel data regression model. Tests are performed for multiple groups of countries, namely for the entire European Union, the old member states, the new member states, and the states most affected by the recent financial and sovereign debt crisis. This classification allows higher accuracy and better interpretability of the model results. Data results show rather pro-cyclicality of fiscal authorities' behaviour.

The aim of the paper is to fi nd out what is the effect of different types of government spending and taxes on economic growth in developed economies. The analysis is performed on a sample of 27 OECD countries in the period 1997-2011. It is based on the neoclassic growth model extended with the level of human capital and fi scal variables. Those include particular types of government spending (according to the COFOG classifi cation) and taxes (according to the OECD classifi cation), and state budget defi cit. From a methodological point of view, panel data estimation is used. We support the view that only some types of government spending are growth-enhancing, and only if they are fi nanced through indirect taxes. However, the results show that only expenditure on defense, education and health, and general public services may be labeled as productive. In addition, we show that direct taxes, especially corporate taxes, negatively affect the growth, also in case they are used to fi nance productive spending.

The Slovak economy is experiencing another significant phase of fiscal consolidation in its history. Unlike previous episodes of major consolidation in our history, our economy cannot "rely" on a soft cushion in the form of favourable global economic situation, integration and launch of new capacities in the automotive industry, as it was in 2003-2005 and 2011. The main objective of this paper is to estimate the size of fiscal multipliers in Slovakia in order to quantify the impact of fiscal packages in 2011 and 2013. The results show that the expenditure oriented consolidation has higher costs in form of lost growth. However, in the medium to long term it is less painful. Effect of consolidation package on GDP growth in 2011 is estimated at -0.99 percentage points. In 2013, we estimate that the fiscal consolidation cuts the growth of 0.68 percentage points.

We analyze corruption and economic freedom links to public finance and investment in new EU members. In terms of the public investment our results show that improvement in economic freedom is linked to increases in public investment while lowering of corruption is linked with increase or decrease with respect to public investment. As a complementary finding we show that increases in public investment are also linked with the ambiguous effect. In case of public finance our estimates suggest that debt usually decreases as economic regulation goes down while the effect on budget deficit goes both ways. On other hand, as corruption declines both budget deficit and debt decrease. Based on our results we generalize that measures taken to lower corruption and economic regulation should lead to improvements in fiscal position in most of the new EU member states.

The paper analyzes an important part of the institutional quality - regulation and studies relation between the regulatory environment and the bureaucratic barriers. The analysis is based on theoretical models of the comparative institutional economics. In the paper, we discuss possibilities of measurement and evaluation of regulation and bureaucracy. We compare the quality of regulatory environment in the EU-25 countries for which we construct specific index. Given principles of the good regulation we characterize basic determinants of the regulatory environment and we try to evaluate how these principles are fulfilled in countries of the EU-25. Additionally, we aim to evaluate the quality of bureaucracy. Finally, we study how the regulatory environment is related to the bureaucratic barriers.