Fiscal Policy Effectiveness through National Budget Allocation on Inflation and Economic Growth Dynamics

Abstract

This study examines the effectiveness of fiscal policy through national budget allocation in influencing inflation dynamics and economic growth. Fiscal policy plays a crucial role in stabilizing macroeconomic conditions, particularly in developing countries facing structural constraints and inflationary pressures. The objective of this research is to analyze how the composition of government expenditure affects price stability and long-term growth performance, as well as to evaluate short-term and long-term relationships among these variables. This study employs a qualitative literature review approach using secondary data derived from academic journals, textbooks, and official reports from international institutions. The data were analyzed using content analysis and descriptive qualitative methods to synthesize theoretical and empirical findings. The results indicate that consumptive expenditures, such as subsidies and routine spending, tend to generate short-term growth but increase inflationary risks. In contrast, capital and human development expenditures contribute to sustainable economic growth and long-term price stability by enhancing productive capacity. Therefore, fiscal policy effectiveness depends more on expenditure composition and fiscal discipline than on the size of government spending alone.