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RESEARCH PRODUCT

The impact of budget deficit on the economic development of Romania

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This paper empirically analyzes the impact of budget deficit on the economic development of Romania. Using the OLS estimates for quarterly series for the period from 2001 to 2011, the results of the estimates prove that there is an indirect relationship between budget deficit and economic growth of Romania. According to the best statistically significant model from the three different model tested, we reached the result that one percent rise of budget deficit gives a 1.36 percent fall in real GDP. This result sustains the neoclassical hypothesis and is against the Keynesist hypothesis or the Ricardian equivalence.