THE EFFECTS OF GOVERNMENT EXPENDITURE ON THE OUTPUT: A REAL BUSINESS CYCLE ANALYSIS FOR THE ROMANIAN ECONOMY

Ștefan-Constantin RADU

doi:10.2478/subboec-2023-0009

Authors

Ștefan-Constantin RADU National Institute of Economic Research, Bucharest, Romania, E-mail: Stefan.radu@iem.ro

DOI:

https://doi.org/10.2478/subboec-2023-0009

Keywords:

economic growth, real business cycle model, Romanian economy

Abstract

One of the most researched topics in macroeconomics is the development and implementation of Real Business Cycle models. This article presents a small Real Business Cycle model, which is built for the Romanian economy, with data from the 2^nd quarter of 1995 through the 3^rd quarter of 2022. The main aim of this analysis is to assess the historical influence of exogenous and government spending shocks on economic growth. In order to obtain accurate results, we implemented a Bayesian estimation technique for calculating the parameters of the model. The main findings indicate the significant exogenous shocks effect on the Romanian economy, and the way in which government spending had a positive effect on increasing economic growth for the period between the 1^st quarter 2000 and the 3^rd quarter of 2022.

JEL classification: E32, E60

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