THEORETICAL AND EMPIRICAL FOUNDATIONS OF FISCAL POLICY

This study conducts a Comparative Theoretical Analysis to explore the theoretical and empirical foundations of fiscal policy, focusing on its role in macroeconomic stabilization and economic growth. By examining Keynesian, neoclassical, and Modern Monetary Theory (MMT) frameworks, the analysis evaluates their assumptions, fiscal multiplier predictions, and policy implications. Keynesian models predict short-term GDP boosts of 1.5% per 1% increase in government spending, amplified to 2.0 at the zero lower bound (Blanchard & Perotti, 2002; Miyamoto & Nguyen, 2024). Neoclassical perspectives highlight crowding-out risks in high-debt economies, with global debt projected at 93% of GDP by 2025 (Leeper & Yang, 2023; International Monetary Fund, 2024). MMT advocates deficit flexibility but struggles in externally constrained economies (Kelton, 2024; Rogoff, 2024). Empirical evidence reveals context-specific outcomes: fiscal rules, adopted by over 100 countries, improve primary balances by 0.5% of GDP, yet procyclicality persists in developing nations (Asatryan et al., 2024; Mawejje & Odhiambo, 2024). The study underscores the need for hybrid fiscal approaches, integrating short-term stimulus with long-term discipline, tailored to institutional and economic contexts. Future research should address nonlinear fiscal-environmental interactions to enhance policy resilience.