<abstract xml:lang="en" xmlns="http://www.w3.org/1999/xhtml"><p>The paper illuminates the non-linear effects of the government budget on short-run economic activity. The study shows that in the Bulgarian economy under a Currency Board Arrangement the tax policy impacts the real growth in the standard Keynesian manner. On the other hand, the expenditure policy exhibits non-Keynesian behavior on the short-run output: cuts in government spending accelerate the real GDP growth. The main determinant of this outcome is the size of the discretionary budgetary changes. The results imply that the balanced budget rule improves the sustainability of public finances without assuring a growth-enhancing effect.</p></abstract>

The paper illuminates the non-linear effects of the government budget on short-run economic activity. The study shows that in the Bulgarian economy under a Currency Board Arrangement the tax policy impacts the real growth in the standard Keynesian manner. On the other hand, the expenditure policy exhibits non-Keynesian behavior on the short-run output: cuts in government spending accelerate the real GDP growth. The main determinant of this outcome is the size of the discretionary budgetary changes. The results imply that the balanced budget rule improves the sustainability of public finances without assuring a growth-enhancing effect.

Determinants of Non-Linear Effects of Fiscal Policy on Output: The Case of Bulgaria

University of Economics - Varna, Varna, Bulgaria

South East European Journal of Economics and Business

The paper illuminates the non-linear effects of the government budget on short-run economic activity. The study shows that in the Bulgarian economy under a...

Determinants of Non-Linear Effects of Fiscal Policy on Output: The Case of Bulgaria

Published Online: Jun 03, 2011

Page range: 51 - 61

DOI: https://doi.org/10.2478/v10033-009-0004-5

This content is open access.