Evaluating the Effectiveness of Possible Introduction of Fiscal Spending Regulation in Ukraine in Retrospective

Abstract

A possible impact of introducing fiscal regulation of spending into the budgetary mechanism, if used before the financial crisis of 2008—2009 or afterwards, has been studied. Accumulation of public finance imbalances in the form of government deficit and debt was taken as an introduction effect. Two approaches are considered as a variant of the spending regulation — limitation of spending depending on the state revenue growth and depending on the nominal GDP growth as well. According to the dynamics, the model defined by the GDP dynamics has more tight restrictions but it is more correlated with the business activity dynamics and is more procyclical. Provided the application of the spending regulation at the beginning of the financial crisis, its level in the GDP would have amounted to 9—21%, the reserve of fiscal space according to this indicator would have amounted to 1—16 percentage points.

Keywords

• fiscal regulation
• regulation of spending
• budget deficits
• procyclicality