Austerity policies, economic growth and fiscal balance: lessons from Slovenia

Abstract

The authors investigate the impact of austerity policies by empirically analysing the crowding out effect, the Ricardian equivalence principle, and the effect of domestic competitiveness on economic growth in Slovenia. Using the narrative method, the authors researched determinants of economic growth and the impact of fiscal policies on the empirical relationship between state debt and economic growth. The authors show that Slovenia has executed austerity measures over short time periods only, and argue that one cannot find convincing evidence that the enacted austerity policy created the theoretically and empirically expected effects. The authors show that the revival of economic growth was independent of enacted austerity policies. Such economic growth has also benefitted the general budget balance and fiscal position of Slovenia.

Keywords

• austerity policy
• growth
• state debt
• Slovenia