THE IMPACT OF FISCAL POLICY ON ECONOMIC GROWTH

This paper investigates the importance of economic policy on financial stability of a country. We use data for 28 countries over the period of 2008 to 2019. The sample regards the countries which are members of European Union. Our results show that control for corruption is a statistically significant variable toward financial stability. On the other hand, variables such as number of taxes and consumption can straighten on a short period of time but on the long run can drive uncertainty from the point of view of fiscal policy efficiency. As fiscal policy represents a driver for economic growth this reflects the importance of public finance sustainability which in turn can act as a cousin for any economic or financial shock. Our results show that countries which have low computer commutations skills as well as low control of corruption register negative impact on economic growth. For our models we used panel data. The regression models results are robust as we run regressions with fixed effects and we controlled for heteroscedasticity.