Government Expenditures and Economic Growth: The Case of Bulgaria
Government Expenditures and Economic Growth: The Case of Bulgaria

Author(s): Ivan Todorov, Desislava Stoilova
Subject(s): Politics / Political Sciences, Politics, Economy, National Economy, Business Economy / Management, Governance, Economic policy, Socio-Economic Research
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: government expenditures; economic growth; Bulgaria
Summary/Abstract: The objective of this paper is to examine the impact of the size and structure of government expenditures on economic growth in Bulgaria during 1996 -2021. An ordinary lest squares approach is employed to test the Armey curve hypothesis for Bulgaria. An autoregression with distributed lag is applied to analyse the effects of the functional categories of government expenditures on economic growth. The empirical results indicate that the average size of total government expenses during 1996 – 2021 (37.61 percent of GDP) is close to their optimum level (37.99 percent of GDP) for the period. A long-term equilibrium exists between economic growth and the functional categories of government expenditures. Each deviation from the equilibrium is eliminated at a rate of 119 percent per annum. In the short run, Bulgaria’s economic growth is positively affected by government expenses on health and environmental protection and negatively influenced by government expenditures on public order and safety.

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