Question 1

What is the fiscal balance and why is it important for fiscal risk analysis?

Accepted Answer

Fiscal balance (budget balance) is the equality of government revenues and expenditures in a year. It is used as an indicator of the government’s capacity to align spending with public revenues and to assess fiscal sustainability and fiscal space.

Question 2

Which factors negatively and positively affect the budget balance in the study?

Accepted Answer

General government debt, foreign direct investments, military expenditures, and unemployment expenditures negatively affect the budget balance. Economic growth and pension expenditures act as positive determinants.

Question 3

How is the study conducted for EU countries and what methods are used?

Accepted Answer

The study analyzes the 27 EU member states with annual data from 2000 to 2021 organized as panel data. It applies regressive models (POLS, fixed effects, random effects), a vector autoregressive model (VAR), and Granger causality to estimate the sign, value, and statistical significance of impacts on the budget balance.