The positive and negative aspects of fiscal policy in improving the business environment

Gaber, Stevan (2011) The positive and negative aspects of fiscal policy in improving the business environment. In: Economic Development and Entrepreneurship in Transition Economies: A Review of Surrent Policy Approaches. First REDETE Conference, 1 (1). Faculty of Economics, University of Banja Luka, BiH, pp. 561-568. ISBN 2233-1034


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In time when the last serious economic crises in the world had made impressionable implications on the economies of the developed and respectively transitional economies, the role of the government have become once again, since the great depression, one of the crucial economic agents that could create positive circumstances for the private sector in order to surpass the current crises. The active government policy through expansive fiscal policy had made impressive step in helping the private sector in supplying them with demand for their services, easier access to funds, simplified administrative procedures and etc. Especially, the lack of capital on the international markets and the fall in international demand forced the governments to intervene and to pull the economy out of recession with intensive government expenditure. This paper focuses on the measures that the government took and tends to take in enhancing the entrepreneurship and specifically on the Macedonian government measures. These measures could help the private sector to overcome the recession and facilitate the economic activity towards increased production and export, but it must also take into consideration the other negative side of this expansive fiscal policy. Exactly the alternatives of financing those budget deficits, which are common in many countries, could initiate intensive borrowing from the government in order to finance those economic activities. Once again, since the ’80-ties, these kind of financing is a reason for unstable and irresponsible growth of the public debt/GDP ratio from the governments. Although, majority of the countries tend to increase the capital investments, but the fact is that most of that money goes for government expenditure. Precisely that excessive government expenditure in most countries is the reason for “crowding out” of private investments. This paper states the borrowing process of the government and their massive demand for capital that puts the private investors in undermined position in comparison to the government which is able to supply the capital through higher price. In other words, this paper is analyzing the positive effects from the government actions and the negative implications that the deficit finance could cause. The final objective of this paper is to detect the implications that may cause the government with the revenue and expenditure side measures in order to help the private sector.

Item Type: Book Section
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Stevan Gaber
Date Deposited: 11 Dec 2012 13:48
Last Modified: 11 Dec 2012 13:48

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