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Public Spending, Financed With European Funds and Its Impact on the Aggregate Supply in Central and Eastern Europe
477
n
1. Limitations of the research
• By the research is used the data for public spending paid, not the amount in EU budget, because only the proj-
ects successfully made have an multiple effects on the GDP;
• The public spending is distinguished by the criteria “ impact on the GDP “ – if create or consume a part of
GDP;
• Because the different way to be made the data by National statistics – with or not accumulation, monthly or
quarterly – the different variables are recalculated to be mathematically compatible; effectiveness is measured
through the degree of impact of public spending with EF on the GDP.
2. Model
2.1 Model for public spending with national funds
The original model was developed to test the impact of public spending on the GDP in the states in Central and
Eastern Europe. The model is based on the such for testing the influence of monetary and fiscal policy on GDP
and expected inflation of Carvalho, Eusepi and Grisse 2. The model is adjusted to specific conditions in Central
and Eastern Europe. The testing starts with public spending, financed with national funds. It aims to be calculated
the coefficients of impact the independent on dependent variables and to be compared with such for the public
spending, financed with European funds. The research looks for stronger and multiple effects of public spending
with funds from EU.
The public spending, financed with national funds is tested up to now in case of Bulgaria for period
2005 – 2013. The period is different with such for public spending, financed with EF, because a lack of projects and
of data for EF before 2008.
The model first was tested for the public spending, financed with national funds.
GDP
t
= a
0
+ a
1
PS total
t
+ a
2
PS total
t-1
+ ε,
(1)
where
GDP
t
- Gross domestic product for the current quarter
PS total
t
- total public spending by consolidated state budget for the current quarter
(2)
PS total
t - 1
- total public spending by consolidated state budget for the previous period
where
GDP
t
- Gross domestic product for the current quarter
PCS
t - 1
- public capital spending by consolidated state budget for the previous period
GDP
t
= c
0
+ c
1
PSS
t
+ c
2
PSS
t-1
+ ε,
(3)
GDP
t
- Gross domestic product for the current quarter
PSS
t
- public expenditure for salary and social insurance by consolidated state budget for the current quarter
PSS
t - 1
- public expenditure for salary and social insurance by consolidated state budget for the previous period