Acta Univ. Agric. Silvic. Mendelianae Brun. 2016, 64(4), 1373-1381 | DOI: 10.11118/actaun201664041373

Quality of Public Finance and Economic Growth in the Czech Republic

Irena Szarowská
Department of Finance and Accounting, School of Business Administration, Silesian University, Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic

Quality of public finances belongs to a key policy challenge as its improvement should lead to a long-term economic growth. The aim of the paper is to investigate if the key channels and tools used by the public finance (structure of revenue system, size of the government and composition of expenditure, level and sustainability of fiscal position) affect economic growth in the Czech Republic in the period 1995-2013. The empirical model is based on the methodology of Barro and Sala-i-Martin (2003) and the model of Mankiw et al. (1992) which is adapted to the framework of this study. The results of dynamic regressions suggest that economic growth is affected by public finance variables only partly and traditional sources of economic growth (human capital or openness) play bigger role. Provided evidence shows that total tax burden as well as the structure of revenue system (especially implicit tax rates on labour and consumption) should be primarily used as tools for maintain macroeconomic objectives. On the contrary, changes in size and composition of expenditure, balance and debt report not statistically significant impact.

Keywords: public finance, economic growth, revenue, expenditure, fiscal position, governance, efficiency
Grants and funding:

This paper was supported by the Ministry of Education, Youth and Sports within the Institutional Support for Long-term Development of a Research Organization in 2016.

Prepublished online: August 30, 2016; Published: September 1, 2016  Show citation

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Szarowská, I. (2016). Quality of Public Finance and Economic Growth in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64(4), 1373-1381. doi: 10.11118/actaun201664041373
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