Development and Finance from issue 2009/1

Csaba G. Tóth

Budget and Growth – from Adjustment to Adjustment

- Abstract -

JEL H-50

The Hungarian economy posted a stable growth rate of around 4-5 percent between 1997 and 2006. This seemingly balanced expansion, however, conceals volatile developments in the state budget. The cyclical nature of economic policy, which adjusted itself to election years, fed off growth in spending that varied in structure in the different years. Consequently, the state budget exerted a significant impact on the changes and structure of GDP growth in almost every year, both positive and negative. In this study I endeavoured to shed light on budgetary developments aligned to election cycles between 1997 and 2006, and on what role these played in the seemingly balanced progress of economic growth. There is a strong correlation between the two. The increases in spending in relation to the individual election years, which differed in size and structure, influenced the pace of economic growth in different ways (naturally in the short run). Only the rate of economic growth stayed essentially the same.

Csaba G. Tóth, PhD student (Doctoral School in Economics, Debrecen University)

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