Fiscal policy and growth in a small emerging economy: The case of Bulgaria

Abstract

The purpose of this article is to study the impact of fiscal policy on economic growth in Bulgaria for the period 1995–2018. The descriptive analysis is focused on the general trends in fiscal policy and tax structure. The influence of government spending and taxation on economic growth is studied through regressions on time-series data. The empirical estimates prove that taxation is a more reliable instrument of fiscal policy than government spending in terms of a small open emerging-market economy. The dilution of the effect of public spending is probably caused by the high negative values of the current account balance that have been maintained for long periods. Thus, when domestic supply is weak, government expenditure cannot stimulate domestic production, as supply is dominated by import goods. Public investments demonstrate a negative effect on economic growth, which suggests a low productivity of investment spending. A factor of great importance is the level of corruption, which is strongly correlated with government investments, but is harmful to their efficiency. The Bulgarian tax system demonstrates consistency with economic growth. The receipts from value-added tax seems growth-conductive. The decrease of the corporate income tax rate exerts a positive impact on economc performance during the analyzed period, while personal income taxation demonstrates a negative effect. Property taxation has no significant relation with the growth of the Bulgarian economy.

Economic Growth Effects of Fiscal Policy in South Africa: Empirical Evidence from Personal Income Tax

“…Thirdly, personal income appeared to be growth-friendly, this view is endorsed by Moyo et al (2021) and Maganya (2020) for South Africa and Tanzania respectively. While some studies discovered that personal income tax is harmful to economic growth as confirmed by Stoilova and Patonov (2020)…”

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“…This study is motivated by studies conducted by Moyo et al (2021), Maganya (2020) and Stoilova and Patonov (2020). Based on reviewed literature the study estimated the following model:…”

The Sectoral Nexus in a Small Open Economy: Evidence from Nigeria

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“…Restrictive policies improve the situation in the public finance sector from the long-term perspective, contributing to moderate economic growth. Stoilova & Patonov (2020) prove that taxation is a more reliable instrument than government spending in a small open emerging-market economy. Benos (2009), examining the impact of fiscal policy on economic growth in European countries, notes the importance of the structure of public spending.…”