Impact Of Fiscal Policy On Economic Growth In Middle-income Countries

Since the global financial crisis, economic growth in developing countries has been gradually slowing down, and forecasts show that this trend will continue in the future. Fiscal policy is one of the instruments that can accelerate economic growth. This study focuses on examining the impact of public spending on health, education and road infrastructure on the economic growth of middle-income countries. The objective of this study is to identify the optimal public financial management strategies to stimulate economic growth. The empirical part of the paper draws on data for middle-income countries from 2000 to 2020. Cross-sectional regression models, fixed effects models, random effects models and generalized method of moments are used to determine the impact of individual categories of public expenditure on economic growth. The results of the study establish that public expenditure on health increases the rate of economic growth in the next period. Investment in road infrastructure has a positive impact on economic growth in the period in which it is made, but it has a negative impact on GDP growth in the medium term. Public spending on education turns out to be insignificant both in the short and long term.