Reference:
Poylov N.A..
Fiscal policy and economic growth in the short and long run: a literature review
// Taxes and Taxation. – 2023. – № 6.
– P. 30-50.
DOI: 10.7256/2454-065X.2023.6.69281.
DOI: 10.7256/2454-065X.2023.6.69281
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Abstract: The purpose of this paper is to establish the main channels of fiscal policy impact on economic growth and to identify problems or missing aspects in the analysis. The paper summarizes the impact of fiscal policy on economic growth in the long-run and short-run on the basis of extensive (82 sources) literature analysis. The paper analyzes the results of theoretical and empirical studies. The paper pays attention to the comparison of empirical results for poor and rich countries, as the optimal fiscal policy may differ significantly from country to country. On the theoretical side, the paper mainly focuses on endogenous growth models, but also touches on overlapping generations and Solow models. Special attention is paid to the estimation of fiscal multipliers.
Through a broad view, the paper touches upon the main instruments of fiscal policy and their impact on economic growth both in the short run and in the long run.
The author's contribution is in overview of a wide body of literature on fiscal policy, which helps to identify the main problems in analyzing the impact of fiscal policy. Fiscal policy can have short- and long-term effects on economic growth through changing the incentives of economic agents, through reducing transaction costs between them, and through influencing expectations. However, the main body of empirical literature examines the impact of fiscal policy on economic growth in developed countries. This poses a challenge for fiscal policy in developing countries, as recommendations derived from the experience of developed countries are often suboptimal for developing countries. The article also points out the significant problems associated with empirical analysis of the performance of fiscal policy even in developed countries.
Keywords: fiscal policy cycles, fiscal multipliers, government size, government debt, taxes, government spending, economic growth, fiscal policy, fiscal policy restrictions, consolidation
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