• Gheorghita DINCA
  • Marius Sorin DINCA
  • Catalina POPIONE



fiscal balance, public debt, economic growth, fiscal sustainability


The purpose of our paper is to identify the main factors which influence fiscal balance’s evolution and thereby propose solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.

JEL Codes - H62


Alesina, A., and Ardagna, S., 2010. Large Changes in Fiscal Policy: Taxes versus Spending In J. R. Brown (Ed.), Tax Policy and the Economy (Vol. 24, pp. 35-68): University of Chicago Press.

Alesina, A., Campante, F. R., and Tabellini, G., 2008. Why is Fiscal Policy Often Procyclical? Journal of the European Economic Association, 6(5), 1006-1036. doi:

Ali Abbas, M. S., Bouhga-Hagbe, J., Fatás, A., Mauro, P., and Velloso, C. R., 2011. Fiscal Policy and the Current Account. IMF Economic Review, 59(4), 603-629. doi:

Anderson, T. W., and Hsiao, C., 1981. Estimation of dynamic models with error components. Journal of the American Statistical Association, 76(375), 598-606. doi:

Bénétrix, A. S., and Lane, P. R., 2010. International Differences in Fiscal Policy During the Global Crisis. NBER Working Paper, 16346.

Buchanan, J. M., 1962. The Relevance of Pareto Optimality. The Journal of Conflict Resolution, 6(4), 341-354. doi:

Chari, V. V., Christiano, L. J., and Kehoe, P. J., 1991. Optimal fiscal and monetary police: Some recent results. Journal of Money, Credit and Banking, 23(3), 519-539. doi:

Chari, V. V., Christiano, L. J., and Kehoe, P. J., 1994. Optimal fiscal policy in a business cycle model. Journal of Political Economy, 102(4), 617-652. doi:

Chari, V. V., and Kehoe, P. J., 1998. Optimal fiscal and monetary police: Federal Reserve Bank of Minneapolis Research Department.

Cimadomo, J., 2012. Fiscal Policy in real time. The Scandinavian Journal of Economics, 114(2), 440-465. doi:

Daniel, B. C., and Shiamptanis, C., 2013. Pushing the limit? Fiscal policy in the European Monetary Union. Journal of Economic Dynamics and Control, 37(11), 2307-2321. doi:

De Hoyos, R. E., and Sarafidis, V., 2006. Testing for Cross-sectional Dependence in Panel Data Models. Stata Journals, 6(4), 482-496.

Favero, C., Giavazzi, F., and Perego, J., 2011. Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy. IMF Economic Review, 59(4), 652-682. doi:

Gavin, M., and Perotti, R., 1997. Fiscal Policy in Latin America. NBER Macroeconomics Annual, 12, 11-61. doi:

Greene, W. H., 2008. Econometric Analysis: Pearson Education

Hoechle, D., 2007. Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3), 281-312.

Kaminsky, G., Reinhart, C., and Végh, C., 2004. When It Rains It Pours: Procyclical Capital Flows and Macroeconomic Policies. In M. Gertler and K. Rogoff (Eds.), NBER Macroeconomic Annual 2004 (Vol. 19).

Klein, P., and Ríos-Rull, J. V., 2003. Time-consistent optimal fiscal policy. International Economic Review, 44(4), 1217-1245. doi:

Klemm, A., 2014. Fiscal Policy in Latin America over the Cycle. IMF Working Paper.

Lane, P. R., 2003. The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD. Journal of Public economics, 87(12), 2661-2675.

Langedijk, S., 2004. The Pro-Cyclicality of Fiscal Policy in EMU Quarterly Report on the Euro Area (Vol. 3, pp. 27-37). Brussels: European Commission.

Leeper, E. M., 2010. Monetary Science, Fiscal Alchemy. NBER Working Paper, 16510. doi:

Lucas, R. E., and Stokey, N. L., 1983. Optimal fiscal and monetary policy in an economy without capital. Journal of Monetary Economics, 12(1), 55-93. doi:

Lukkezen, J., and Teulings, C., 2013. Optimal Fiscal Policy. Tinbergen Institute Discussion Paper, No. 13-064/VI.

Ramsey, F. P., 1927. A contribution to the theory of taxation. Economic Journal (Oxford), 37(145), 47-61. doi:

Talvi, E., and Végh, C., 2005. Tax base variability and procyclical fiscal policy in developing countries. Journal of Development Economics, 78(1), 156-190. doi:

Zhu, X., 1992. Optimal fiscal policy in a stochastic growth model. Journal of Economic Theory, 58(2), 250-289. doi:




How to Cite

DINCA, G., DINCA, M. S., & POPIONE, C. (2016). ANALYZING FISCAL BALANCE EVOLUTION FOR DEVELOPED AND EMERGENT COUNTRIES. Scientific Annals of Economics and Business, 63(3), 299–310.