Macroeconomics and Monetary Economics - 1
Abstract
The aim of this paper is analyze the impact of irregular receipts (one-time receipts such as
dividends from public companies and privatization proceeds) in budget deficits that are partially
financed by public debt (internal and external) in Kosovo. Kosovo is experiencing both a budget deficit
and public debt burden, so it is important to analyze the very beginnings of these tendencies. There is
extensive literature on the causes of a budget deficit, its definition and measurement. The literature
review method is adopted for this study, and research is refined by including empirical and theoretical
studies of budget deficits and public debts. Using this line of reasoning, we have defined and measured
special-purpose deficits, so-called “regular” budget deficits that consider only regular receipts and
outlays. This analysis leads to the conclusion that irregular receipts used by government to engage in
large infrastructure projects and/or politically motivated increases of wage and salary bills and social
transfers created future liabilities that had to be financed through public debt. This is a case study of
Kosovo. Research has been carried out using primary data drawn from Kosovo’s annual financial
reports and annual bulletins on public debt. Budget deficits in Kosovo are results of continuous outlays
based on initially high cash balances and irregular receipts that could not be met later by regular
receipts. All this was supported by lack of legal infrastructure or fiscal rules for several years. The
implications of this paper will be of high importance for policy-makers and academics. This is a unique
approach to the issues of Kosovo's budget deficit and debt.
References
Public Economics, 89, pp. 571–597.
Alesina, A. & Perotti, R. (1994). The political economy of budget deficits. NBER Working paper, No.
4637, pp. 1-48.
Aschauer, D.A. (1989). Is Public Expenditure Productive? Journal of Monetary Economics, 23, pp.
177-200.
Badinger, H. & Reuter, W.H. (2017). The case for fiscal rules. Economic Modelling, 60, pp. 334-343.
Barişik, S. & Baris, A. (2017). Impact of governance on budget deficit in developing countries.
Theoretical and Applied Economics, Vol. XXIV, 2(611), pp. 111-130.
Blejer, M.I. & Cheasty, A. (1991). The measurement of fiscal deficits: analytical and methodological
issues. Journal of economic Literature, 29(4), pp. 1644-1678.
Bernheim, B.D. (1989). A Neoclassical Perspective on Budget Deficits. Journal of Economic
Perspectives, Vol. 3, 2, pp. 55-72.
*** Budget Annual Financial Reports, Ministry of Finance of Kosovo, issues for 2006-2016.
Dur, R.A.; Peletier, B.D. & Swank, O.H. (1997). The Effect of Fiscal Rules on Public Investment if
Budget Deficits are Politically Motivated, Erasmus University Rotterdam, Tinbergen Institute, No. 97-
125/1, pp. 1-18.
Eisner, R. (1989). Budget deficits: rhetoric and reality. Journal of economic perspectives, 3(2), pp. 73-
93.
Eisner, R. & Pieper, P.J. (1985). How to make sense of the deficit. The Public Interest, (78), pp. 101-
118.
Fay, W. & Porter, R. (2006). Optimal budget deficits. Harvard Law School Briefing Paper, 28, pp. 1-
37.
Fischer, S. & Easterly, W. (1990). The economics of the government budget constraint. The World
Bank Research Observer, 5(2), pp. 127-142.
Fukač, M. & Kirkby, R. (2017). Accounting for Uncertainty in Public Debt Targets. The Australian
Economic Review, vol. 50, 1, pp. 89–102.
Grembi, V.; Nannicini, T. & Troiano, U. (2016). Do Fiscal Rules Matter? Applied Economics, 8(3),
pp. 1–30.
Groneck, M. (2010). A golden rule of public finance or a fixed deficit regime? Growth and welfare
effects of budget rules. Economic Modelling, 27(2), pp. 523-534.
Guerguil, M; Mandon, P. & Tapsoba, R. (2017). Flexible fiscal rules and countercyclical fiscal policy.
Journal of Macroeconomics, 52, pp. 189–220.
Hamilton, J.D. & Flavin, M.A. (1986). On the Limitations of Government Borrowing: A Framework
for Empirical Testing. American Economic Review, Vol. 76, 4, pp. 808-819.
Heinemann, F.; Moessinger, M. & Yeter, M. (2018). Do fiscal rules constrain fiscal policy? A metaregression-
analysis. European Journal of Political Economy, 51, pp. 69-92.
*** IMF Country Report, 15/131.
*** IMF Country Report, 18/31.
Irwin, T.C. (2015). Defining the government's debt and deficit. Journal of Economic Surveys, 29(4),
pp. 711-732.
Jacobs, D.; Schoeman, N.J. & Van Heerden, J.H. (2002). Alternative definitions of the budget deficit
and its impact on the sustainability of fiscal policy in South Africa. South African Journal of
Economics, 70(3), pp. 251-257.
Koczan, Z. (2015). Fiscal deficit and public debt in the Western Balkans: 15 years of economic
transition. IMF Working Paper, 15/172, pp. 1-20.
Kotlikoff, L.J. (1986). Deficit delusion. The Public Interest, 84, pp. 53-65.
Luechinger, S. & Schaltegger, C.A. (2013). Fiscal rules, budget deficits and budget projections.
International Tax and Public Finance, 20, pp. 785–807.
Meltzer, A.H. (1992). Debt and Deficits: Some Measurement, Economic and Political Issues. Fiscal
Politics and the Budget Enforcement Act, Marvin Kosters (ed.) American Enterprise Institute,
Washington.
Poterba, J.M. (1996). Do budget rules work? Burch Working Paper, No. B96-12, pp. 1-46.
Shi, M. & Svensson, J. (2006). Political budget cycles: Do they differ across countries and why?
Journal of public economics, 90(8-9), pp. 1367-1389.
*** Yearly Bulletin on Public Debt, Ministry of Finance of Kosovo, issues for 2009 – 2016.
Published
How to Cite
Issue
Section
License
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
