FISCAL POLICY AND THE CONCEPTUAL MECHANISM OF FISCAL SYSTEM

Abstract

The government, in most democratic states, has the supreme monopoly characteristic of public services, services that are realized through fiscal policy instruments, respectively through government revenues and expenditures. This research aims to provide the defining substrates of fiscal policy, so that a theoretical model of the fiscal system’s functioning to can be outlined, from the perspective of the three sectors of the state, respectively: the economic, social and political plan. In order to achieve this objective, it was used as a research method, the case study of the specialized literature, being a qualitative research, meant to bring pluses in knowledge. Establishing the fiscal strategy at the level of state's political plan has direct effects on the economic plan, and, depending on the fiscal policy at the national level, there may be influences on the social plan of the country. Thus, any political choice affects the socio-economic component of the state and vice versa. The design of the taxation system can be considered an essential ingredient in public policies, as it mainly finances government spending. Based on the study, it was concluded that the use of public revenues and expenditures in order to influence the degree of the economy’s development, makes fiscal policy to be considered the medicine or the drug of public finances, which can cure or worsen the existing situation.

Keywords

• fiscal policy
• fiscal mechanism
• fiscal system
• keynesian theory