THE IMPACT OF PUBLIC EXPENDITURES ON THE ECONOMIC GROWTH OF ALBANIA

Abstract

The main purpose of this paper is to analyze public expenditures and their impact on economic growth in Albania. It is widely recognized that an increase in public expenditures translates into an increase in GDP level. The analysis of the impact of public expenditures is associated with elements that affect economic growth both positively and negatively. Therefore, this is a topic that requires continuous study, not only for governance but also to understand the impact they have on each individual and the economy as a whole. Albania is a small country with an open economy, so the study of the impact of public expenditures on the economy is very important to understand their use as an instrument of fiscal policy and to predict trends in the future. In the conditions of change and reformation of fiscal policies, the structure of government expenditures will likely also change. To study the level of expenditures helps to understand in which functions the government has mostly directed the revenue it has received from different sources. We also highlight which government functions are well covered by spending and which are at low levels and require more attention. This paper takes into study health public expenditures, defense public expenditures, education public expenditures and total public expenditures. These variables are analyzed based on the econometric model. These variables have the highest impact on the level of GDP.