Relationship Between General Government Expenditure and Economic Growth in Czechia ^*

Abstract

Government spending plays a crucial role in fiscal policy in any country, both as a tool for implementing individual government policies and as a possible instrument for mitigating uneven economic developments and economic shocks. This chapter provides direct empirical evidence on the development and structure of general government expenditure and its relationship with real economic growth in Czechia and the European Union countries. Compared to theoretical recommendations, general government expenditure has not been used as a stabiliser in Czechia and EU countries and has been observed to be pro-cyclical in the period under review. Granger causality analysis identified the direction of causality between the macroeconomic variables analysed and found that in most cases economic growth came first, followed by government spending.

Citation

Szarowská, I. (2024), "Relationship Between General Government Expenditure and Economic Growth in Czechia ^* ", Stavárek, D. and Tvrdoň, M. (Ed.) Modeling Economic Growth in Contemporary Czechia (Entrepreneurship and Global Economic Growth), Emerald Publishing Limited, Leeds, pp. 137-151. https://doi.org/10.1108/978-1-83753-840-920241009