Macroeconomic Effects of Budget Expenditure in Bulgaria (Econometric Analysis)

This article studies the short-term and long-term impact of expenditure fiscal policy on the macroeconomic activity in Bulgaria. The study is based on an econometric analysis that uses vari­ous econometric techniques within an established algorithm following the logical schema of vector au­toregression models that look at the characteristics, the significance, and the quantitative expressions of the studied relationships. The resulting empiri­cal data shows that long-term budget expenditure increase stimulates real GDP growth, providing that expenditure has not reached marginal levels. This macroeconomic activity driving effect is observed when capital expenditure increases, while current expenditure growth has no impact that is statistically significant. In short periods of economic up­turn, the expenditure fiscal policy should address the ratio between the different types of expenditure, giving priority to capital over current expenditure. In times of economic downturn, expansionary fiscal measures associated with increase in both capi­tal and current expenditure have the capacity to stimulate economic growth and help limit the drop in macroeconomic activityexpenditure fiscal policy, macroeconomic activity, econometric analysi