Fiscal policy and economic growth: Some evidence from Kosovo

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Abstract

The main purpose of this study is to analyze the effects of fiscal policy on economic growth in the Republic of Kosovo for the time period from January 2006 to September 2018 in terms of their long-term and short-term relationships. The methods used are measured using the second data (monthly series) provided by the Department of Finance as the appropriate national institution. Kosovo as one of the Balkan countries is facing the same problems as other labor countries. This study will contribute greatly to analyzing the impact of fiscal policy and will help policymakers come up with good decision-making. The econometric vector autoregression (VAR) model used in this study uses total public expenditure, total public income, fixed income structure, and consumer price index as independent variables and gross domestic product (GDP) as a dependent variable. In addition, in order of consistency time-series data were evaluated by the augmented Dickey-Fuller unit root test. The study concludes that total public expenditure significantly affects GDP; on the other hand, the total public income has a positive but visible impact on GDP, which means that the impact of government investment is more pronounced on financial development compared to public revenue; and increased demand for co-operation has decreased in monetary terms (World Bank, 2021). It is possible that government spending and structure may be related to key development quality ideas, such as the segregation of wages and environmental support (Halkos & Paizanos, 2015).

Keywords: Fiscal Policy, Economic Growth, Direct Taxes, Indirect Taxes, VAR Model, Granger Causality Test

Authors’ individual contribution: Conceptualization — B.H. and P.M.; Methodology — B.H.; Formal Analysis — B.H.; Writing — Original Draft — B.H.; Writing — Review & Editing — B.H. and P.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E60, E61, E62

Received: 28.05.2021
Accepted: 13.09.2021
Published online: 15.09.2021

How to cite this paper: Hamza, B., & Milo, P. (2021). Fiscal policy and economic growth: Some evidence from Kosovo. Journal of Governance & Regulation, 10(4), 130–136. https://doi.org/10.22495/jgrv10i4art11