How fiscal policy affects financial development: Empirical analysis from Southeast European countries
Abetare Krasniqi 1 2 , Atdhetar Gara 2 * , Hyrije Abazi-Alili 3
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1 Ministry of Education, Science, Technology and Innovation, Pristina, KOSOVO2 South East European University, Tetovo, NORTH MACEDONIA3 College Pjetër Budi, Pristina, KOSOVO* Corresponding Author

Abstract

This study investigates the impact of fiscal policy on financial development in Southeastern European (SEE) countries from 2005 to 2023, using panel data from the World Bank Database and the Global Economy Database for 10 nations. Employing robust econometric techniques, including fixed effects, random effects, and generalized method of moments, the analysis reveals that income from taxes, public debt, and government effectiveness significantly drive financial development, with positive coefficients of 0.2680, 0.0167, and 4.4940. While government spending and fiscal freedom were included in the model, they did not show statistical significance. These findings highlight the critical role of effective tax systems, prudent debt management, and strong governance in fostering financial stability in SEE countries. The study underscores the need for targeted fiscal reforms to enhance financial development, offering valuable insights for policymakers in emerging economies.

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Article Type: Research Article

EUR J SUSTAIN DEV RES, Volume 10, Issue 1, 2026, Article No: em0349

https://doi.org/10.29333/ejosdr/17395

Publication date: 01 Jan 2026

Online publication date: 09 Nov 2025

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Article Downloads: 203

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