The impact of fiscal policy dynamics and the trade deficit on the budget deficit in Syria during the period 2006-2022

Abstract

This study aimed to clarify whether the public budget deficit in Syria is affected by the dynamics of fiscal policy and the trade deficit. To achieve this objective, the researcher reviewed previous literature, as well as quantitatively described and analyzed data in the Syrian economy to determine the size of fiscal and trade deficits and the value of the fiscal policy discount factor. This was done by analyzing data on the public budget deficit, the trade deficit, real interest rates, and real growth as variables to assess the degree of the fiscal policy discount factor during the period 2006–2022. The Johansen cointegration test and the Fully Corrected Least Squares (FMOLS) model were used using Eviews 13 software. The FMOLS model confirmed a significant negative relationship between the fiscal policy discount factor and the public budget deficit, and a significant positive relationship between the trade deficit and the public budget deficit.