Abstract:
The optimal mix of fiscal policy plays an important role even in a small economy such as the Czech Republic. Therefore the aim of the paper is to investigate the effect of fiscal policy on economic growth in the Czech Republic, which is examined in the context of European Union member countries. From a methodological point of view, panel data estimation is used for European Union countries in the period 1996-2012. The results of the analysis show that institutional conditions have a significant impact on economic growth via fiscal policy. In the case of countries with low-quality institutional framework, which also includes the Czech Republic, productive expenditure have negative impact on economic growth apparently because of inefficient use of these expenditure. For this reason, the Czech Republic should focus on the institutional framework through the increase of fiscal transparency.
