Econometric analysis of the impact of public revenues on Kosovo's economic development

• Author: Teki Shala
• Position: European University Tirana
• Pages: 195-202

Vol. 3 No. 2

July 2017

ISSN 2410-3918

Acces online at www.iipccl.org

195

Academic Journal of Business, Administration, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

Econometric analysis of the impact of public revenues on Kosovo's economic

development

Teki Shala

European University Tirana

Abstract

A countr y can be economically viable when the human, physical, and fi nancial resources

available are e ectively used to ensure the economic growth and well-being of its residents.

The purpose of this study is to ascertain whether government revenues (GR) have a positive

e ect on the HDI, which would prove the hypothesis that government revenue is an important

instrument of economic development in Kosovo. The data source for this study are for the

period 2004-2016 received by the Ministry of Finance of Kosovo, the International Monetary

Fund and UNDP. OLS techniques (multiple regressions) are used to analyse the generated

data. In the econometric analysis we have used two models, the fi rst being the correlation

between the variables set in the model between government revenue (GR) and the Human

Development Index and the second the government revenue and GDP. The results obtained

from the fi rst econometric model show government revenues have a positive impact with a

0.96 percent correlation, respectively 96.7 percent. Based on this, we conclude that government

revenues have a positive impact on Kosovo's economic growth. While the results derived from

the second econometric model show that the level of signifi cance is 0.955, and in this case the

result negates the hypothesis that revenues have an impact on the human development index

in Kosovo. Taking into account the results of this research, Kosovo institutions need to review

their decisions and take important steps to capitalize the collected taxes and fees to increase

the welfare of the population by investing more in education, health and Social welfare

Keywords: Public Revenue, Economic Growth, Economic Development, Human Development

Index, Gross Domestic Product.

Introduction

Kosovo experienced a total collapse of the economic and fi scal system in the

1990s. Immediately a er the end of the armed confl ict and a er the declaration of

independence from Serbia, it built a new economic system that enabled it to raise

public revenues to cover public spending (Shala, 2017). A country can be economically

viable when the human, physical, and fi nancial resources available are e ectively

used to ensure the economic growth and well-being of its residents. Resource support

is important but e ective use of these resources to ensure sustainable development

and growth of welfare is even more important. The development process is linked

to a variety of policies, including: fi nancing development and public infrastructure,

regulatory framework, government intervention, and industrial policy. Strong,

market-oriented and economic-political stability has proven to be important factors,

especially for transition economies. (Mustafa dhe Zogaj, 2009). In Kosovo and

beyond, much research has been done on the e ect of public revenues on economic