Effects of fiscal policy on the Republic of Serbia and neighboring countries

Abstract

Fiscal policy is a powerful instrument for stabilizing the national economy, and with its help the level and structure of taxes, expenditures and debt management are controlled. Fiscal policy management affects aggregate demand, the distribution of wealth, and the economy's ability to produce goods and services. It represents a tool of macroeconomic policy, and in this paper the authors will particularly deal with the impact of fiscal policy on certain macroeconomic components: public debt, balance of payments, but also on the attraction of foreign direct investments and competitiveness. States must conduct a responsible fiscal policy in accordance with their capabilities in order to reduce poverty and social inequalities, and at the same time ensure economic growth. Fiscal sustainability is a complex issue, especially in periods of crisis, and therefore it is necessary to make decisions that will have positive effects on economic development in the long term.