Analysis of the relationship between the level of public revenues and public expenditure (in relation to GDP) and the amount of investments in 2001-2015 in the countries of Central and Eastern Europe belonging to the European Union

Abstract: More and more research results confirm the existence of non-Keynesian economic reaction to fiscal policy, partially explaining their limited effectiveness in stimulating the economy. These studies show that long-lasting fiscal consolidation, in particular by reducing public spending, can boost economic growth, and the key variable responsible for the expansive effect appears to be investment. The correlation analysis shows the existence of a negative (moderate weak)relationship between the average level of investment and the average size of the public sector in the economy (measured by the level of public revenue and public expenditure in relation to GDP) in the long run in 11 countries of Central and Eastern Europe belonging to the European Union (stronger for public expenditure: r = –0.36 and weaker for public revenue: r = –0.22). An analysis of the above correlation separately for individual economies showed negative correlation in 9 out of 11 CEE countries (both for public revenue and public expenditure) in the 2001-2015 period, of which four were strong or very strong.