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GLOBAL ECONOMIC CRISIS AND EFFECTIVENESS OF PUBLIC SPENDING: THE EU PRACTICE

Year 2016, Volume: 3 Issue: 3, 139 - 158, 29.07.2016
https://doi.org/10.15637/jlecon.131

Abstract

The financial crisis of 2008 affected the whole world and it had a negative impact on
economies. The effects of the crisis are still experienced in several nations. Especially high budget
deficits, public debt and unemployment problems caused a heated debate on public spending that was
increased to prevent economic recession in the post-crisis era. This study aims to discuss public
expenditure efficiency in the wake of global financial crisis. The study utilized a database including
the indicators of; Public Expenditures (as a dependent variable), Gross Domestic Product (GDP),
Gross Domestic Product Growth Rate, Unemployment Rate, Public Debt, Fiscal Deficit, Human
Development Index (HDI). HDI. We used panel regression analysis for 28 EU countries, and time
series analysis for the the top 10 countries in terms of per capita income for the period of 2000-2015.
:And this study argues that the high public spending did not affect the indicators used in this study in a
positive way. In addition, to this, Norway, Luxemburg and Germany showed best performance in the
post-crisis period.

References

  • ADAM, C. S. & BEVAN, D.L.,2005, Fiscal Deficits and Growth in Developing Countries, Journal of Public Economics, 89(4), 571 – 597.
  • AFONSO, A.,SCHUKNECHT, L.& TANZI, V., 2005, Public Sector Efficiency: An International Comparison, PublicChoice, 23(1), 321–347. AFONSO A., SCHUKNECHT, L. & TANZI, V., 2010, Public Sector Efficiency: Evidence for New EU Member States and Emerging Markets, Applied Economics, 42(17), 2147–2164.
  • AFONSO, A.&FERNANDES, S., 2006, Local Government Spending Efficiency: The Evidence for the Lisbon Region, Regional Studies, 40(1), 39–53.
  • AFONSO, A. & ST AUBYN, M., 2005,Non-Parametric Approaches to Education and Health Efficiency in OECD Countries, Journal of Applied Economics, 8(2), 227–246.
  • AKTAN, C. C.,& ŞEN, H., 2001, Ekonomik Kriz: Nedenler ve Çözüm Önerileri, Yeni Türkiye Ekonomik Kriz Özel Sayısı, 42 (II), 1225-1230
  • ANGELOPOULOS, K.,PHILIPPOPOULOS, A.&TSIONAS, E., 2008, Does Public Sector Efficiency Matter? Revisiting the Relation Between Fiscal Size and Economic Growth in a World Sample, Public Choice, 137, 245–278.
  • JAHANGIR, A.,CARAMAZZA, F.& SALGADO, R., 2000, Currency Crises: in Search of Common Elements, IMF WorkingPaper, 2000, WP/00/67, 1-55.
  • BRAHMBHATT M.& CANUTO O. , (2012), Fiscal Policy for Growth and Development, The World Bank, 91, 1-7.
  • BORGER, B. D., KERSTENS, K., MOESEN, W. & VANNESTE, J., 1994, Explaining Differences in Productive Efficiency: an Application to Belgian Municipalities , Public Choice, 80: 3/4, 339-358.
  • BORGER, B. D. & KERSTENS, K.,1996,Cost Efficiency of Belgian Local Governments: A Comparative Analysis Of FDH, DEA, and Econometric Approaches, Regional Science and Urban Economics, 26, 145–70.
  • CAMERON, C. & PRAVIN, T., 2005, Microeconometrics Methods and Applications, Cambridge UniversityPress.
  • CANUTO, O. & GIUGALE, M.,2010,The Day After Tomorrow : A Handbook On the Future of Economic Policy in the Developing World,Washington, DC: World Bank.
  • CROTTY, J., 2008, Structural Causes of the Global Financial Crisis: A Critical Assessment of the New Financial Architecture, WorkingPaper, No.2008-14. EUROPEAN COMMISSION, 2012, European Economy The Quality of Public Expenditures in the EU, Occasional Papers, http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/pdf/ocp125_en.pdf(Retrieved Date:12/04/2016).
  • EUROPEAN COMMISSION, 2014, Financial Crisis: Causes, Policy Responses, Future Challenges, https://ec.europa.eu/research/social-sciences/pdf/policy_reviews/KI-NA- 26554_EN-C.pdf( Retrieved Date: 13.02.2016.
  • GUPTA, S. & VERHOEVEN, M., 2001, The Efficiency of Government Expenditure Experiences From Africa, Journal of Policy Modeling, 23(4), 433 – 467.
  • GRIGOLI, F., 2012, Public Expenditure in the Slovak Republic: Composition and Technical Efficiency, IMF Working Paper, No.173.
  • GREENE, W., 2010, Modelsfor Panel Data, Retrieved from: http://people.stern.nyu.edu/wgreene/Lugano2013/Greene-Chapter-11.pdf (Retrieved Date: 11.04.2016).
  • HAUNER, D. & KYOBE, A., 2010, Determinants of Government Efficiency, World Development, 38 (11), 1527–1542. IMF, 1998, World Economic Outlook, IMF: Washington, DC.
  • MARTINS, S.& JOSÉ VEIGA F.,2014, Government size, composition of public expenditure, and economic development, International Tax and Public Finance, 21(4), August: 578-597.
  • MWEGA, F.M., 2010, Global Financial Crisis Discussion Series, Overseas Development Institute, London.
  • GATAUWA, J. M., 2014, The 2008 Global Economic Crisis and PublicExpenditure: A Critical Review of the Literature, Advances in Management &Applied Economics, 4 (2), 131-145.
  • HERRERA, S. & GAOBO, P., 2005, Efficiency of Public Spending in Developing Countries: An Efficiency Frontier Approach, World Bank.
  • KARAKURT, B. 2010,Küresel Mali Krizi Önlemede Maliye Politikasının Rolü Ve Türkiye’nin Krize Maliye Politikası Cevabı, Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 24(2), 167-195.
  • ST AUBYN, M., 2005, Evaluating Efficiency in the Portuguese Health and Education Sectors, Economia, 26, 25-51.
  • TANZI, V. & SCHUKNECHT, L.,1997, Reconsidering the Fiscal Role of Government: The International Perspective, The American Economic Review, 87(2), 164-168.
  • TANZI, V., 2005, The Economic Role of the State in the 21st Century, Cato Journal, 25(1), 617–38.
  • TANZI, V., 2011, Government Versus Markets: The Changing Economic Role of the State, Cambridge University Press, New York.
  • TANZI, V., 2015, Fiscal and Monetary Policies During the Great Recession: A Critical Evaluation, Comparative Economic Studies, 57 (2), 243-275.
  • TOYE, J.,2000, Fiscal Crisis and Fiscal Reform in Developing Countries, Cambridge Journal of Economics, Vol. 24(1), 21-44.
  • KIMENYI, M. S. & MWABU, G., (2005), Policy Advice During a Crisis, Economics WorkingPaper, No. 200541, 1-17.
  • FLORIN, O. & PETRISOR, M.B., 2011, Public Expenditure Policy in the Context of Economic Crisis-Challenges and Implications, http://anale.steconomiceuoradea.ro/volume/2011/n1/035.pdf( Retrieved Date: 10.02.2015].
  • PRAGUE GLOBAL POLICY INSTITUTE, 2012,The Financial CrisisFiveYears On. Stimulus Austerity, http://glopolis.org/en/articles/financial-crisis-five-years-stimulus- vs-austerity-study/(Retrieved Date: 10.02.2015).
  • ŞENSES, F., ÖNİŞ, Z. & BAKIR, C., 2015, Ülke Deneyimleri Işığında Küresel Kriz ve Yeni Ekonomik Düzen, İletişim Yayınları, 2. Baskı, İstanbul.
  • UNITED NATIONS, 2015, Trade and Development Report, United Nations Conference OnTrade and Development,Geneva.
  • OECD, 2015, Economic Policy Reforms: Going to Growth, Berlin.

GLOBAL ECONOMIC CRISIS AND EFFECTIVENESS OF PUBLIC SPENDING: THE EU PRACTICE

Year 2016, Volume: 3 Issue: 3, 139 - 158, 29.07.2016
https://doi.org/10.15637/jlecon.131

Abstract

The financial crisis of 2008 affected the whole world and it had a negative impact on
economies. The effects of the crisis are still experienced in several nations. Especially high budget
deficits, public debt and unemployment problems caused a heated debate on public spending that was
increased to prevent economic recession in the post-crisis era. This study aims to discuss public
expenditure efficiency in the wake of global financial crisis. The study utilized a database including
the indicators of; Public Expenditures (as a dependent variable), Gross Domestic Product (GDP),
Gross Domestic Product Growth Rate, Unemployment Rate, Public Debt, Fiscal Deficit, Human
Development Index (HDI). HDI. We used panel regression analysis for 28 EU countries, and time
series analysis for the the top 10 countries in terms of per capita income for the period of 2000-2015.
:And this study argues that the high public spending did not affect the indicators used in this study in a
positive way. In addition, to this, Norway, Luxemburg and Germany showed best performance in the
post-crisis period.

References

  • ADAM, C. S. & BEVAN, D.L.,2005, Fiscal Deficits and Growth in Developing Countries, Journal of Public Economics, 89(4), 571 – 597.
  • AFONSO, A.,SCHUKNECHT, L.& TANZI, V., 2005, Public Sector Efficiency: An International Comparison, PublicChoice, 23(1), 321–347. AFONSO A., SCHUKNECHT, L. & TANZI, V., 2010, Public Sector Efficiency: Evidence for New EU Member States and Emerging Markets, Applied Economics, 42(17), 2147–2164.
  • AFONSO, A.&FERNANDES, S., 2006, Local Government Spending Efficiency: The Evidence for the Lisbon Region, Regional Studies, 40(1), 39–53.
  • AFONSO, A. & ST AUBYN, M., 2005,Non-Parametric Approaches to Education and Health Efficiency in OECD Countries, Journal of Applied Economics, 8(2), 227–246.
  • AKTAN, C. C.,& ŞEN, H., 2001, Ekonomik Kriz: Nedenler ve Çözüm Önerileri, Yeni Türkiye Ekonomik Kriz Özel Sayısı, 42 (II), 1225-1230
  • ANGELOPOULOS, K.,PHILIPPOPOULOS, A.&TSIONAS, E., 2008, Does Public Sector Efficiency Matter? Revisiting the Relation Between Fiscal Size and Economic Growth in a World Sample, Public Choice, 137, 245–278.
  • JAHANGIR, A.,CARAMAZZA, F.& SALGADO, R., 2000, Currency Crises: in Search of Common Elements, IMF WorkingPaper, 2000, WP/00/67, 1-55.
  • BRAHMBHATT M.& CANUTO O. , (2012), Fiscal Policy for Growth and Development, The World Bank, 91, 1-7.
  • BORGER, B. D., KERSTENS, K., MOESEN, W. & VANNESTE, J., 1994, Explaining Differences in Productive Efficiency: an Application to Belgian Municipalities , Public Choice, 80: 3/4, 339-358.
  • BORGER, B. D. & KERSTENS, K.,1996,Cost Efficiency of Belgian Local Governments: A Comparative Analysis Of FDH, DEA, and Econometric Approaches, Regional Science and Urban Economics, 26, 145–70.
  • CAMERON, C. & PRAVIN, T., 2005, Microeconometrics Methods and Applications, Cambridge UniversityPress.
  • CANUTO, O. & GIUGALE, M.,2010,The Day After Tomorrow : A Handbook On the Future of Economic Policy in the Developing World,Washington, DC: World Bank.
  • CROTTY, J., 2008, Structural Causes of the Global Financial Crisis: A Critical Assessment of the New Financial Architecture, WorkingPaper, No.2008-14. EUROPEAN COMMISSION, 2012, European Economy The Quality of Public Expenditures in the EU, Occasional Papers, http://ec.europa.eu/economy_finance/publications/occasional_paper/2012/pdf/ocp125_en.pdf(Retrieved Date:12/04/2016).
  • EUROPEAN COMMISSION, 2014, Financial Crisis: Causes, Policy Responses, Future Challenges, https://ec.europa.eu/research/social-sciences/pdf/policy_reviews/KI-NA- 26554_EN-C.pdf( Retrieved Date: 13.02.2016.
  • GUPTA, S. & VERHOEVEN, M., 2001, The Efficiency of Government Expenditure Experiences From Africa, Journal of Policy Modeling, 23(4), 433 – 467.
  • GRIGOLI, F., 2012, Public Expenditure in the Slovak Republic: Composition and Technical Efficiency, IMF Working Paper, No.173.
  • GREENE, W., 2010, Modelsfor Panel Data, Retrieved from: http://people.stern.nyu.edu/wgreene/Lugano2013/Greene-Chapter-11.pdf (Retrieved Date: 11.04.2016).
  • HAUNER, D. & KYOBE, A., 2010, Determinants of Government Efficiency, World Development, 38 (11), 1527–1542. IMF, 1998, World Economic Outlook, IMF: Washington, DC.
  • MARTINS, S.& JOSÉ VEIGA F.,2014, Government size, composition of public expenditure, and economic development, International Tax and Public Finance, 21(4), August: 578-597.
  • MWEGA, F.M., 2010, Global Financial Crisis Discussion Series, Overseas Development Institute, London.
  • GATAUWA, J. M., 2014, The 2008 Global Economic Crisis and PublicExpenditure: A Critical Review of the Literature, Advances in Management &Applied Economics, 4 (2), 131-145.
  • HERRERA, S. & GAOBO, P., 2005, Efficiency of Public Spending in Developing Countries: An Efficiency Frontier Approach, World Bank.
  • KARAKURT, B. 2010,Küresel Mali Krizi Önlemede Maliye Politikasının Rolü Ve Türkiye’nin Krize Maliye Politikası Cevabı, Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 24(2), 167-195.
  • ST AUBYN, M., 2005, Evaluating Efficiency in the Portuguese Health and Education Sectors, Economia, 26, 25-51.
  • TANZI, V. & SCHUKNECHT, L.,1997, Reconsidering the Fiscal Role of Government: The International Perspective, The American Economic Review, 87(2), 164-168.
  • TANZI, V., 2005, The Economic Role of the State in the 21st Century, Cato Journal, 25(1), 617–38.
  • TANZI, V., 2011, Government Versus Markets: The Changing Economic Role of the State, Cambridge University Press, New York.
  • TANZI, V., 2015, Fiscal and Monetary Policies During the Great Recession: A Critical Evaluation, Comparative Economic Studies, 57 (2), 243-275.
  • TOYE, J.,2000, Fiscal Crisis and Fiscal Reform in Developing Countries, Cambridge Journal of Economics, Vol. 24(1), 21-44.
  • KIMENYI, M. S. & MWABU, G., (2005), Policy Advice During a Crisis, Economics WorkingPaper, No. 200541, 1-17.
  • FLORIN, O. & PETRISOR, M.B., 2011, Public Expenditure Policy in the Context of Economic Crisis-Challenges and Implications, http://anale.steconomiceuoradea.ro/volume/2011/n1/035.pdf( Retrieved Date: 10.02.2015].
  • PRAGUE GLOBAL POLICY INSTITUTE, 2012,The Financial CrisisFiveYears On. Stimulus Austerity, http://glopolis.org/en/articles/financial-crisis-five-years-stimulus- vs-austerity-study/(Retrieved Date: 10.02.2015).
  • ŞENSES, F., ÖNİŞ, Z. & BAKIR, C., 2015, Ülke Deneyimleri Işığında Küresel Kriz ve Yeni Ekonomik Düzen, İletişim Yayınları, 2. Baskı, İstanbul.
  • UNITED NATIONS, 2015, Trade and Development Report, United Nations Conference OnTrade and Development,Geneva.
  • OECD, 2015, Economic Policy Reforms: Going to Growth, Berlin.
There are 35 citations in total.

Details

Journal Section Articles
Authors

Simla Güzel This is me

İşın Kırışkan Çetin This is me

Publication Date July 29, 2016
Published in Issue Year 2016 Volume: 3 Issue: 3

Cite

APA Güzel, S., & Kırışkan Çetin, İ. (2016). GLOBAL ECONOMIC CRISIS AND EFFECTIVENESS OF PUBLIC SPENDING: THE EU PRACTICE. Journal of Life Economics, 3(3), 139-158. https://doi.org/10.15637/jlecon.131