fiscal policy inflation dynamics emerging economies econometric modeling Vector Autoregression economic stability

In the wake of global economic fluctuations, understanding the effects of fiscal policies on inflation dynamics remains a crucial challenge for policymakers, particularly within emerging economies. This study aims to quantify the relationship between various fiscal policies and their subsequent impact on inflation rates. Utilizing a mixed-method approach, the research combines econometric modeling with case studies from selected economies in Eastern Europe, the Middle East, and South Asia. By employing Vector Autoregression (VAR) models, we analyze historical data spanning two decades to identify significant trends and correlations. Findings suggest that proactive fiscal measures, such as targeted government spending and taxation policies, significantly influence inflationary trends, although the effects vary across regions. The case studies further illustrate the nuanced results of these policies, highlighting the importance of contextual factors such as political stability and external economic pressures. The paper concludes by advocating for more tailored fiscal strategies that consider regional socio-economic variables, thereby enhancing economic stability and growth prospects. These insights are essential for economists and policymakers aimed at devising robust fiscal frameworks in the face of global economic challenges.

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