THE IMPACT OF FISCAL POLICY ON ECONOMIC GROWTH: PANEL DATA ANALYSIS

The economic transition after 1990’s from socialism toward free market economy has changed the role of state in connection of spending decisions and tax policy. The dynamics of fiscal policy has received less attention among researchers in the past. The present study is a comprehensive analysis of the effectiveness of fiscal policy for economic growth. The study examines the effects of fiscal policy on economic growth over the period of 2002 to 2014,based on International Financial Statistics (IFS) database and World Development Indicator (WDI) database.The studyanalyzes the impact of a fiscal shock on economic growth for 10 countries, with the use of panel ARDL econometric technique.The results of the study summarize the fact that fiscal policy is a key instrument in the process of economic growth in the sample economies.