Impact of Fiscal Policies on Economic Growth in Developing Countries
Keywords:
Fiscal policy, economic growth, developing countries, public expenditure, taxationAbstract
This study examines the impact of fiscal policies on economic growth in developing countries by synthesising empirical evidence from post-2015 academic and institutional literature. Using a qualitative, secondary-data-based approach, the study analyses how government expenditure, taxation, fiscal sustainability, and institutional frameworks influence growth outcomes under typical developing-country constraints. The findings indicate that fiscal policy affects economic growth in a highly conditional manner. Productive public expenditure and efficient investment management are consistently associated with positive growth effects, whereas pro-cyclical fiscal behaviour, high public debt under weak institutions, and volatile fiscal policy tend to undermine long-term performance. The evidence further suggests that fiscal multipliers in developing countries are generally modest, reflecting high informality, openness, and limited financial depth. On the revenue side, growth outcomes depend more on tax structure and administrative capacity than on overall tax levels. Overall, the study highlights the importance of composition, stability, and institutional quality in designing growth-oriented fiscal policies in developing economies.
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