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Advances in Social Sciences Research Journal – Vol. 9, No. 6

Publication Date: June 25, 2022

DOI:10.14738/assrj.96.12530. Özker, A. N. (2022). Fiscal Expansion in The EU and Scale Effect on Growth Deviations of Developing Economies. Advances in Social

Sciences Research Journal, 9(6). 178-191.

Services for Science and Education – United Kingdom

Fiscal Expansion in The EU and Scale Effect on Growth Deviations

of Developing Economies

Prof. Dr. Ahmet Niyazi ÖZKER

Bandirma Onyedi Eylul University, Faculty of Economics and

Administrative Sciences, Public Finance Department 10200-TURKEY

ORCID ID: 0000-0001-5313-246X

ABSTRACT

The accelerating effect of financial support and incentives creates different growing

trends in countries representing emerging economies. This phenomenon is the

subject of other economic growth models in a process in which the expected public

supports positively affects emerging economies, including financial monetary

policies. Besides the structural effects of the budgetary expansion phenomenon,

this study aims to analyse the contribution to economic growth, especially in

countries representing emerging economies within the EU's scope and put forth the

scale values for determining possible deviations in response to increasing

monetary expansions. These countries have different actual economic growth

trends from EU countries, which mean different fiscal policy targets within the

scope of the public economy have created other efficiency deviations in

expenditure-based policies. It is observed that the fact that public financial support

does not appear solely based on public expenditures and that their possible indirect

effects on the public budget have a different impact on the target economic growth

trends in an expanding fiscal process. Here, the problem for emerging economies is

to achieve a controlled fiscal expansion and public spending trends without causing

possible macroeconomic deviations from target economic growth. Whether the

fiscal-budgetary expansion will include a possible inflationary process in the

expansion of the monetary base can also be followed in the empirical process in

which the monetary policy targets and the fiscal policies in practice form the basis

of possible conflict.

Key Words: Economic Growth, Emerging Economies, European Unity, Fiscal Expanding,

Monetary Policies.

JEL Codes: H30, H54, O11, O23.

INTRODUCTION

The phenomenon of financial expansion, especially in the EU countries, occurs in different

impact values and expresses a position where subsidies and incentives, which are described as

financial transactions, especially public expenditure-oriented expenditures, come to the fore.

At the same time, it highlights the different characteristics of public spending in developed

countries with the different increasing values in developing countries. However, it is also seen

that the reasons for the increase in public expenditure are shaped for various purposes,

especially in the EU member countries among the developing and developed first world

countries. Today, this orientation brings more economic growth-oriented work to the plan as a

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Özker, A. N. (2022). Fiscal Expansion in The EU and Scale Effect on Growth Deviations of Developing Economies. Advances in Social Sciences

Research Journal, 9(6). 178-191.

URL: http://dx.doi.org/10.14738/assrj.96.12530

monetary expansion phenomenon and expresses a meaningful structure with a common

growth-oriented standard [1]. These adverse effects in factorial distributions come to the fore,

especially in a global process where it is generally negative and needs to be more supported by

the effectiveness of monetary public expenditure limits. The phenomenon of monetary

expansion also encompasses undoubtedly an expansion process in which increases in the open

market operations of the Central Bank regarding the process are experienced, especially in a

process where public expenditures increase. In this respect, it is in question that the increased

effect of monetary expansion on public spending put forth as a significant effect mechanism

structure [2].

The economic expansion of more sectors via increasing public expenditures on markets in

developing economies affects the monetary demand and also aims to affect GDP positively.

Undoubtedly, injecting money into the economy, especially in the phenomenon of monetary

expansion, regarding the catching of a periodic growth trend focused on economic growth, also

expresses the effectiveness of the money supply increase mechanism in the markets of debt

service. This phenomenon means monetary expansion via redemption practices in a process

where government bonds or other financial assets are purchased. Therefore, a monetary

expansion on bonds, one of the monetary policy instruments, also reveals a structural

relationship model in which the proportional reciprocal increase effect of money limits and

financial liquidity due to short-term and high-interest practices also occurs [3]. Again, it should

emphasize that the average monetary expansion within the European Union countries is

meaningful, especially with increasing limits based on public expenditures. In this respect, it is

necessary to emphasize the recent developments that may impact the increase in public

spending, especially after 2010. In addition to the current situation in the reduction of public

deficits and the structural decrease in primary obligations during the encouraging effect of

some low-rate taxes has a significant impact on the increase in public expenditures. In addition,

it is an essential public expenditure variability to say that each fiscal and monetary expansion

implementation create different effects of change and significantly increases the impact of

interest rates [4]. However, it is observed that the macro-dynamics in the composition of public

expenditures enter into different processes, especially in the design of variability. Public

expenditures reveal an essential difference in the current approach, especially towards

investment expenditures. The recent tendency of total spending to decrease and this tendency

to show differences according to the development gap and indebtedness level of the countries

is seen as one of the most important reasons for the countries within the scope of the EU to face

the phenomenon of monetary expansion. The fact that investment expenditures predominantly

need monetary expansion in countries with high debt as a ratio of GDP is a phenomenon beyond

ordinary monetary policy as a monetary expansion phenomenon in the EU [5]. In addition to

countries with a medium debt burden, it can be said that the decline in investment expenditures

primarily reveals investment expenditure stagnation in social expenditures as primary public

expenditures. However, regardless of the level and angle, it is seen that the increase in public

spending is in a higher trend as a proportion of GDP in highly indebted countries, and the EU

average in monetary expansion inevitably rises [6].

LITERATURE REVIEW

It is possible to talk about many studies conducted in the previous years and today, which put

forth the phenomenon of monetary expansion in the EU and its possible structural effects.

However, critical institutional studies, directly related to our subject and primarily focused on

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Advances in Social Sciences Research Journal (ASSRJ) Vol. 9, Issue 6, June-2022

Services for Science and Education – United Kingdom

economic growth, provide an essential resource for our research and have been entirely

meaningful. We can list some of these critical studies, which also contributed to our research,

in chronological order as below:

ü First, in this report prepared by the European Central Bank [7] which is the named study

1999 to 2010 Monthly Bulletin, the liquidity effect of monetary expansion is discussed.

This study has emphasised the importance of the standard money supply increase

criteria for the central bank policies.

ü In the following years, there is a report prepared again by the ECB [8] under the

Convergence Report for the next ten years, covering the period after 2000. This report

determined the control and impact values of the monetary expansion targets.

ü In the study on “Monetary and Exchange Rate Arrangements of the Euro Area” by the

ECB [9] and covering thirty EU countries, we see the study in which the monetary

expansion phenomenon is handled with mutual exchange rate effects and the effect

valuation is done.

ü The existence of monetary liquidity variability in the study, which is published as a

monthly bulletin by the ECB [10] the last ten years of EU countries was discussed in

terms of the economic base, and the necessity of a controlled monetary policy in the

process was emphasised.

ü Besides, the bulletin that was issued as a monthly bulletin and as a special edition by the

ECB [11], is meaningful for 2008 and next. In the monthly publication named “One

Monetary Policy and Many Fiscal Policies”, we see that monetary increases require a

softer upward trend for the EU. The emphasised was the monetary expansion fact that

the currency change phenomenon must be compatible with global cost equivalence,

which is significant and meaningful.

ü In another monthly bulletin named “Rotation of Voting Rights in the Governing Council

of the ECB”, by the ECB [12], it is clearly stated that the political preferences and rights

of EU member countries in using the Euro come to the fore and that EU countries may

have different exchange rate assessments in terms of monetary scope is seen.

ü Also, ECB [13], “The ECB’s Relations with European Union Institutions and Bodies –

Trends and Prospects” is the monthly newsletter, we watch that monetary expansion

brings corporate infrastructure needs to the fore.

ü One of the most critical current studies on the phenomenon of financial development in

the European Union is the study by the European Central Bank-ECB [14]. In the study,

in which the effects of monetary fiscal expansion on economic growth, especially for the

economic development targets of the EU, were analysed based on policies, it was tried

to determine the scale effect of fiscal expansion in particular.

ü Another recent critical study is the study conducted and published by the European

Commission [15]. The recommendation in this critical study, titled Council

Recommendation on The Economic Policy of the Euro Area by, emphasises the effects of

possible monetary expansions in the EU in the past years, and essential determinations

and suggestions are made for the following years.

ü Another recent critical study named The European Union: Questions and Answers was

put forth by the Congressional Research Service [16], which includes crucial approaches

to monetary expansion in the EU. In this study, determining the differences in the impact

of the budgetary increase on economic growth in developing economies and the

different financial effect values have an important place in this study for EU. And also,

the possible global effects of financial growth for the EU have been discussed and a