THE CAUSAL RELATIONSHIP BETWEEN FISCAL POLICY AND ECONOMIC GROWTH: EVIDENCE FROM EMU COUNTRIES

Fiscal policy is an important tool in the hand of the central authorities in order to influence the economic activity. Recently, fiscal policy become a common problem throughout Europe, and therefore is treated by international regulation. In 2011, the European Commission emphasized the importance of fiscal policy harmonization within the European Union (EU). In this context, this paper analyzed if the European Monetary Union (EMU) countries have all premises in adopting successful fiscal policy instruments. Regarding this, we used Granger causality test in order to identify the significant influence of fiscal policy on economic indicators. The main results pointed out that the direct taxes and government expenditure have a significant impact on more than 25% of EMU countries.