Assessing the impact of fiscal freedom and the rule of law upon output growth in some Central and Eastern European countries

Authors

DOI:

https://doi.org/10.15587/2706-5448.2025.322824

Keywords:

institutes and institutions, institutional support, output growth, Central and Eastern European countries, Ukraine

Abstract

The object of the study was selected to be several countries of Central and Eastern Europe (Poland, Romania, the Czech Republic, Hungary) and Ukraine, where one of the problem areas is the dependence of economic growth on fiscal freedom and the rule of law.

To study this functional relationship, it is possible to use empirical estimates for quarterly data from 2010 to 2022 using the GMM method. The empirical estimates obtained for individual countries show significant differences in the impact of fiscal freedom and the rule of law on income. This allows to better understand the specifics of fiscal policy and institutional transformation in the selected countries. There are several main results. First, improving the financial situation is favorable for economic growth in Poland, Romania, and Ukraine, but unfavorable in the Czech Republic (there is no effect in Hungary). Second, it was found that lower government spending is beneficial for economic growth only in Romania and Hungary (to a lesser extent). At the same time, for the Czech Republic and Ukraine, an increase in government spending is preferable. Third, the protection of property rights encourages economic growth only in Ukraine. The inverse relationship for Central and Eastern European countries may mean that administrative guarantees in the area of property rights are much stricter than the achieved income level would suggest. Fourth, the efficiency of the judicial system is found to encourage economic growth in 4 out of 5 countries except the Czech Republic.

The paper confirms the findings of other studies for Central and Eastern European countries and Ukraine that currency devaluation in nominal and real terms hinders economic growth. Money emission and interest rate increases in the US are favorable for economic growth in all countries. The consequences for economic growth of the increase in global crude oil prices, the COVID-19 pandemic and the period of extremely low interest rates (ZLB) in 2010–2020 differ across countries.

Author Biographies

Mariia Blikhar, Lviv Polytechnic National University

Doctor of Juridical Sciences, Professor, Head of Department

Department of Administrative and Informational Law

Solomiya Sokurenko, Lviv University of Trade and Economics

PhD Student

Department of International Economic Relations

Andrii Hodiak, Lviv State University of Internal Affairs

PhD, Associate Professor

Department of Administrative Law and Administrative Process

Yuliia Ilkiv

PhD, Independent Researcher

Mariana Kashchuk, Lviv State University of Internal Affairs

PhD, Associate Professor

Department of Foreign Languages and the Culture of Professional Speech

Anatolii Kucher, Lviv Polytechnic National University

Doctor of Economic Sciences, Senior Researcher, Professor

Department of Management of Organizations

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Assessing the impact of fiscal freedom and the rule of law upon output growth in some Central and Eastern European countries

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Published

2025-02-14

How to Cite

Blikhar, M., Sokurenko, S., Hodiak, A., Ilkiv, Y., Kashchuk, M., & Kucher, A. (2025). Assessing the impact of fiscal freedom and the rule of law upon output growth in some Central and Eastern European countries. Technology Audit and Production Reserves, 1(4(81), 61–69. https://doi.org/10.15587/2706-5448.2025.322824

Issue

Vol. 1 No. 4(81) (2025): Economics of enterprises. Macroeconomics

Section

Problems of Macroeconomics and Socio-Economic Development

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Copyright (c) 2025 Mariia Blikhar, Solomiya Sokurenko, Andrii Hodiak, Yuliia Ilkiv, Mariana Kashchuk, Anatolii Kucher

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