The Classification of Public Expenditure in Post-Soviet Union States and OECD Member Countries

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1 Nijat Huseynov The Classificati of Public in Post-Soviet Uni States and OECD Member Countries Summary: Fiscal policy has been an essential tool for world ecomies, developing countries in particular, in enhancing development. This paper investigates the management of public expenditures in the selected countries, including OECD members and Post-Soviet states. In essence, these countries have encountered similar milestes. The primary goal of this research is to characterise the fiscal policies of these countries and draw parallels, including the applicati of correlati analysis between the expenditure and. Ultimately, the analysis of available data reveals that the distributi and percentage of public expenditure within have been diversified in the various sectors due to different dominant activities. Based the main results of the cluster analysis, two groups are distinguished: 6 countries in the first group and 9 in the secd group. The expenditure social has been a priority for both groups. However, the secd group of countries have spent more mey social purposes. The correlati analysis shows that there is a positive linear relatiship between expenditure the and in the past decade in all of the countries selected. Keywords: public expenditure, fiscal policy,, OECD, post-soviet states JEL Codes: E62, H50, O10, P20 TThe collapse of the Soviet Uni laid the foundati for member states and Central and Eastern European socialist countries to pass into a period of transiti. In spite of expectatis, the process was burdened with challenges due to the different policies. Nevertheless, accessi to various organisatis and unis, including the Commwealth of Independent States (CIS), the Eurasian Ecomic Uni, the European Uni (EU) and the OECD, has fulfilled the role of strengthening local ecomies. address: nijat.huseynzade@gmail.com Goryunov, Kotlikoff, and Sinelnikov Murylev (2015) cclude that in the lg-term, increasing expenditure social and falling tax revenue from the oil and gas sectors lead to a budget deficit and result in unstable fiscal policy for the Russian ecomy. The authors believe that the Russian government should find additial sources to finance rising public spending. Goryunov et al. (2013) csider public expenditure to be real debt, and feel that oil and gas revenue represent the main source of covering spending for the Russian ecomy. It has been cclusively shown (Raudla and Kattel, 2011) that after the Public Finance Quarterly 2017/2

2 global financial crisis, Estia cut public expenditure and increased tax rates. Kasperowicz (2015) mentis that the global financial crisis had a negative impact the Baltic states ecomies and, as the result, these governments have taken csolidati measures. A recent study by Klyviene (2014) proves that public spending cuts in Baltic States can positively affect output. Grigoli (2012) presents the main feature of fiscal policy in the Slovak Republic after the global financial crisis. In his case study, the author ccludes that the government tried spending more social in comparis with the EU and OECD average. Setnikar and Petkovšek (2014) highlight the general situati of the fiscal policy in Slovenia. The authors believe that the government should balance public finances in order to meet the requirements of the EU and to ensure sustainable development. Transfers from State Oil Fund of the Republic of Azerbaijan to the state budget have ensured immense financial resources to cover public spending. However, this situati creates fundamental challenges for sustainable fiscal policy and growth (Aslanli, 2015). Additially, the Belarusian government has applied several fiscal policy reforms, however, the levels of transparency are still insufficient (Eckardt, Martinez-Vazquez, and Timofeev, 2014). Mkhatrishvili and Zedginidze (2015) menti that, after the Rose Revoluti and the Russian-Georgian War, fiscal csolidati strategy has lead to higher debt and fiscal expansi. Chirachi (2015) csiders the cooperati between metary policy and fiscal policy to be the key tool in Moldova to ensure lg-term stability. Azhgaliyeva (2014) investigates the effects of fiscal policy the Natial Fund s revenue, reserves and public spending in Kazakhstan. In this case study, the author emphasises the importance of fiscal policy in preventing the high volatility of oil revenue. Abdullaev and Kya (2014) indicate that the transiti period in Uzbekistan was the main reas for the deteriorati of the budget. However, in this study, the authors also cclude that the government has been successful in implementing reforms and recommend that the government reduce the tax burden in order to ensure sustainable development. Aleksandrova (2013) is of the opini that the Ukrainian government was unable to develop efficient and effective fiscal tools. The author believes that fiscal policy should be directed at fostering growth. Kazandziska (2015) draws attenti to the cut in public expenditure in Poland during the decline of 2000/2001 and 2012/2013. Another key cclusi of the study is that compared to other EU member states, fiscal policy in Poland was less efficient. According to Endrit and Drini (2013), fiscal policy in Hungary is cnected to political fiscal cycles. Barro and Gord (1989) found that government csumpti could not ensure sufficient stimulus for investment and growth. The structure of the study is organised as follows. The secti methodology explains the author s approach to the research. The study then ctinues with the presentati of the main features of public spending in the selected countries. The next secti is devoted to discussing the results of the analysis. Finally, the paper ccludes with the summary of the analysis and comments pertaining to the various countries. Methodology The study characterises public expenditure in the selected countries through cluster analysis. The main goal of cluster analysis is to identify which objects in a given set are similar (Romesburg, 2004). The author interprets the Public Finance Quarterly 2017/2 381

3 share of public expenditure of in each country in order to understand their respective fiscal policy. Furthermore, total expenditure for each country has been broken down into four variables: general public services defence, public order, safety, envirmental protecti (agriculture, forestry, fishing and hunting, fuel, energy, mining, manufacturing, cstructi, transport, communicati) social (housing, community amenities, health, recreati, culture, religi, educati, social protecti) In additi, the author has used correlati analysis between expenditure and for each country in order to investigate their potential relatiship and efficiency. with the excepti of Azerbaijan. Furthermore, the Russian Federati, Hungary and Belarus have spent the highest percentage of total expenditure general public services. In ctrast, Azerbaijan and Georgia have spent the main part of their public expenditure and defence, public order and safety, and envirmental protecti. According to Table 2, within expenditure, the IMF takes five main activities into account: agriculture, including forestry, fishing and hunting; fuel and energy; mining, manufacturing and cstructi; transport; and communicati. Undoubtedly, the distributi of public spending varies account of the different potentials in each country. Apart from that, the ctributi level of sectors has also been varied in each county (see Table 3). Selected countries and data The main source of the data is the Government Finance Statistics of the IMF. The author has selected 15 countries (OECD members: Hungary, the Slovak Republic, Slovenia, Poland; Post-Soviet Uni states: Latvia, Lithuania, Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, the Russian Federati, the Ukraine, Uzbekistan; Countries that fall into both categories: Estia). The author has used 2013 data for the cluster analysis in order be able to characterise the countries efficiently based available data. The main indicator for each of the countries is the percentage of. However, the author has used data from 2000 to 2014 for the correlati analysis. Table 1 shows public expenditure in each country in The table reveals that expenditure social represented a dominant part of public spending for all countries, Results Table 4 identifies final cluster centres for the 15 countries. The countries have been divided to two groups with a 6 to 9 ratio (see Table 5). All in all, the expenditure social has been a priority for both country groups. However, in the cluster 2, this predominance is greater than in cluster 1 with a value of The expenditure represents the secd directi for the countries. Lithuania, Azerbaijan, Georgia, Kazakhstan, the Russian Federati, Uzbekistan are in the first cluster, and Estia, Latvia, the Slovak Republic, Slovenia, Hungary, Poland, Belarus, Moldova, the Ukraine are in the secd cluster (see Table 6). In the case of each country, the distance makes it clear how similar they are to each other or in which range they fall into from the centre point of the clus- 382 Public Finance Quarterly 2017/2

4 Table 1 expenditure, percentage of total expenditure, 2013 Country general public services defence, public order, safety, envirmental protecti social Estia Latvia Slovak Republic Slovenia Hungary Lithuania Poland Azerbaijan Belarus Georgia Kazakhstan Moldova Russian Federati Ukraine Uzbekistan Source: IMF, Government Finance Statistics, ter. Figures 1 and 2 reveal the exact positi of the countries in the clusters. In any case, it is more expedient to investigate each cluster member separately. Public expenditure social in Lithuania equals 23.6% of and 66.7% of total spending. The remaining part of government spending is made up of public expenditure general public services (5.3% of and 14.8% of total spending), (3.5% of and 9.8% of total spending), defence, public order and safety, and envirmental protecti (3.1% of and 8.8% of total spending). Public expenditure in Azerbaijan equals 15.6% of (the highest percentage amg all 15 countries) and 43.2% of total spending. In comparis with the members of the first cluster, the Azerbaijan government has spent ly 34.2% of total spending (12.8% of, which is e of the lowest rates amg the 15 countries) social. The remaining part of government spending is made up of public expenditure general public services (3.7% of and 10.2% of total spending), defence, public order and safety, and envirmental protecti (4.5% of and 12.4% of total spending). Public expenditure social in Kazakhstan equals 12.3% of (which is e of the lowest amg the 15 countries) and 60.8% of total spending. The remaining part of government spending is made up of public expenditure defence, public order and safety, and envirmental protecti Public Finance Quarterly 2017/2 383

5 Table 2 Structure of expenditure, percentage of totel expenditure, 2013 Country Agriculture (including forestry, fishing and hunting) Fuel and energy Mining, manufacturing, cstructi Transport Communicati Estia Latvia Slovak Republic Slovenia Hungary Lithuania Poland Azerbaijan Belarus Georgia Kazakhstan Moldova Russian Federati Ukraine Uzbekistan Source: IMF, Government Finance Statistics, (3% of and 14.8% of total spending), (2.6% of and 13% of total spending), and general public services (2.2% of and 11.2% of total spending). Public expenditure social in the Russian Federati equals 23.2% of and 54.9% of total spending. In comparis with the members of the first cluster, the Russian government has spent ly 22.6% of total spending (9.5% of, which is e of the highest rates amg the 15 countries) general public services. The remaining part of government spending is made up of public expenditure defence, public order and safety, and envirmental protecti (5.5% of and 13.2% of total spending), and (4% of and 9.4% of total spending). Public expenditure social in Uzbekistan equals 20.6% of and 67.5% of total spending. The remaining part of government spending is made up of public expenditure (4.3% of and 14.2% of total spending), and defence, public order and safety, and envirmental protecti (4.2% of and 13.8% of total spending). In comparis with the members of the first cluster, the Uzbekistan government has spent ly 4.6% of total spending (1.41% of, the lowest rate amg the 15 countries) general public services. 384 Public Finance Quarterly 2017/2

6 Table 3 Value added by sectors percentage of, 2014 Country Agriculture Manufacturing Industry Services, etc. Estia Latvia Slovak Republic Slovenia Hungary Lithuania Poland Azerbaijan Belarus Georgia Kazakhstan Moldova Russian Federati Ukraine Uzbekistan Source: World Bank data, Final cluster centres Table 4 Cluster 1 2 general public servies defence, public order, safety, envirment protecti social Source: author's own analysis based IMF Government Finance Statistics, 671BCDC565A9 Public expenditure social in Estia equals 25.6% of and 65.9% of total spending. The remaining part of government spending is made up of public expenditure (4.9% of and 12.5% of total spending), defence, public order and safety, and envirmental protecti (4.4% of and 11.3% of total spending), and Public Finance Quarterly 2017/2 385

7 Table 5 Number of cases in each cluster Cluster Valid Missing.000 Source: according to the IMF, Government Finances statistics, author's own analysis, 671BCDC565A9 Cluster membership Table 6 Case number Country Cluster Distance 1 Estia Latvia Slovak Republic Slovenia Hungary Lithuania Poland Azerbaijan Belarus Georgia Kazakhstan Moldova Russian Federati Ukraine Uzbekistan Source: author's own analysis based IMF Government Finance Statistics and World Bank data; BDCD-671BCDC565A9; general public services (4% of and 10% of total spending). In Latvia, another Baltic state, public expenditure social equals 33% of and 64.4% of total spending. The remaining part of government spending is made up of public expenditure general public services (6.8% of and 13.2% of total spending), (6.7% of and 13% of total spending), and defence, public order and safety, and envirmental protecti (4.9% of and 9.4% of total spending). Public expenditure social in the Slovak Republic equals 29.8% of and 72.8% of total spending. The remaining part 386 Public Finance Quarterly 2017/2

8 the positi of the countries according to expenditure general public services and defence, public order and safety, envirmental protecti Figure general public services defence, public order, safety, envirment protecti and the world Bank data. author's own analysis; of government spending is made up of public expenditure (7.2% of and 17.6% of total spending), defence, public order and safety, and envirmental protecti (3.9% of and 9.5% of total spending), and general public services (3.4% of and 8.4% of total spending). Public expenditure social in Slovenia equals 34.7% of (the highest percentage amg all 15 countries) and 58.1% of total spending. The remaining part of government spending is made up of public expenditure (14.5% of and 24.2% of the total), general public services (6.7% of and 11.3% of the total), and defence, public order and safety, and envirmental protecti (3.9% of and 6.4% of the total). Public expenditure social in Hungary equals 29% of and 58.5% of total spending. It should also be mentied that the Hungarian government has spent 20.9% of total spending (10.8% of, the highest rate amg the 15 countries) general public services. The remaining part of government spending is made up of public expenditure (6.8% of and 13.7% of total spending), and defence, public order and safety, and envirmental protecti (3.5% of and 7% of total spending). In Poland, public expenditure social equals 29% of and 68.2% of total spending. The remaining part of government spending is made up of public expenditure general public services (5.7% of and Public Finance Quarterly 2017/2 387

9 Figure 2 The positi of the countries according to expenditure and social social and the world Bank data. author's own analysis, % of total spending), (4.1% of and 9.7% of total spending), and defence, public order and safety, and envirmental protecti (3.7% of and 8.7% of total spending). Public expenditure social in Belarus equals 27.7% of and 64.4% of total spending. The remaining part of government spending is made up of public expenditure general public services (7% of and 16.3% of total spending), (4.9% of and 11.4% of total spending), and defence, public order and safety, and envirmental protecti (3.4% of and 8% of total spending). Public expenditure social in Moldova equals 27% of and 70.1% of total spending. The remaining part of government spending is made up of public expenditure (4.6% of and 11.9% of total spending), general public services (3.7% of and 9.7% of total spending), and defence, public order and safety, and envirmental protecti (3.2% of and 8.2% of total spending). The Ukrainian government has spent 75.3% of total expenditure (35.9% of, the highest rate amg the 15 countries) social. The remaining part of government spending is made up of public expenditure general public services (4.4% of and 9.3% of total spending), defence, public order and safety, and envirmental protecti (4% of and 8.6% of total spending), and (3.4% of and 7.1% of total spending). 388 Public Finance Quarterly 2017/2

10 Estia The Estian government has spent 62.3% and 14.3% of public expenditure for transport and agriculture (Table 2, 2013), respectively. In comparis, the output of agriculture and manufacturing has been less than the other sectors (Table 3, 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 7 and Figure 3). Latvia The Latvian government has spent 60.3%, 9.1% and 7.9% of the public expenditure for (Table 2, in 2013), transport, agriculture and manufacturing (including mining, cstructi) respectively. In comparis, the output of the agriculture and manufacturing have been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 8 and Figure 4). Slovak Republic The Slovak government has spent 58.1% and 15.3% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. At the same time, the output of agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a strg positive linear relatiship between expenditure and in the period (see Table 9 and Figure 5). correlati: estia, Table 7 correlati: estia Figure 3 2.0E10 R 2 Linear = E ** 0.973** 1 1.5E10 y=2.79e *x 1.25E10 1.0E10 7.5E9 2.0E8 4.0E8 6.0E8 8.0E8 1.0E9 ** is significant at the 0,01 level (2 tailed). Public Finance Quarterly 2017/2 389

11 correlati: Latvia, Table 8 correlati: latvia Figure 4 2.5E10 R 2 Linear = E10 1.5E10 1.0E10 5.0E9 y=5.06e *x 5.0E8 1.0E9 1.5E9 ** is significant at the 0,01 level (2 tailed). Table 9 correlati: Slovak republic, correlati: slovak republic Figure ** 0.873** ** ** E10 R 2 Linear = E10 6.0E10 5.0E10 4.0E10 3.0E10 2.0E9 3.0E9 4.0E9 5.0E9 y=2.3e *x ** is significant at the 0,01 level (2 tailed). 390 Public Finance Quarterly 2017/2

12 Azerbaijan The Azerbaijan government has spent 90% and 5.5% of public expenditure for (Table 2, in 2013) mining (including manufacturing and cstructi) and agriculture, respectively. In comparis, the output of the agriculture and manufacturing have been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 10 and Figure 6). Belarus The Belarus government has spent a quarter of public expenditure for (Table 2, in 2013) agriculture, and the remaining part mining (including manufacturing and cstructi) and transport in equal amounts. The separate output of agriculture and manufacturing has been less than the other sectors of the country s ecomy, but joint output was greater than in the other countries (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 11 and Figure 7). Georgia The Georgian government has spent 64.7% and 13.5% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. In comparis, the output of the agriculture and manufacturing have been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 12 and Figure 8). Table 10 correlati: Azerbaijan, correlati: Azerbaijan Figure ** N ** 1 N E10 R 2 Linear = E10 5.0E10 y=1.77e *x 4.5E10 4.0E10 3.5E10 4.0E9 5.0E9 6.0E9 7.0E9 8.0E9 9.0E9 1.0E10 ** is significant at the 0,01 level (2 tailed). Public Finance Quarterly 2017/2 391

13 correlati: belarus, Table 11 correlati: belarus Figure 7 8.0E10 R 2 Linear = E ** 5.0E10 4.0E10 y=1.08e *x N ** 1 N E10 0.0E10 0.0E0 1.0E13 2.0E13 3.0E13 4.0E13 ** is significant at the 0,01 level (2 tailed). correlati: georgia, Table 12 correlati: georgia Figure E10 R 2 Linear = E ** 2.0E10 1.5E10 y=8.18e *x N ** 1 N E10 5.0E9 0.0E0 2.0E8 4.0E8 6.0E8 8.0E8 1.0E9 1.2E9 1.4E9 ** is significant at the 0,01 level (2 tailed). 392 Public Finance Quarterly 2017/2

14 Hungary The Hungarian government has spent 54.3% and 6.7% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. On the other hand, the output of the agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 13 and Figure 9). Kazakhstan The Kazakhstan government has spent 56.3% and 26.3% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. On the other hand, the output of the agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a strg positive linear relatiship between expenditure and in the period (see Table 14 and Figure 10). Moldova The Moldavian government has spent 57.9% and 30% of public expenditure for transport and agriculture (Table 2, in 2013), respectively. The output of agriculture was higher than in the other countries (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 15 and Figure 11). correlati: hungary, Table 13 correlati: hungary Figure ** 3.0E13 2.5E13 3.0E13 y=5e *x R 2 Linear = ** 1 1.5E13 8.0E11 1.0E12 1.2E12 1.4E12 1.6E12 1.8E12 2.0E12 2.2E12 ** is significant at the 0,01 level (2 tailed). Public Finance Quarterly 2017/2 393

15 Table 14 correlati: kazakhstan, correlati: kazakhstan Figure E13 R 2 Linear = E13 2.0E13 1.0E13 0.0E0 0.0E0 2.0E11 4.0E11 6.0E11 8.0E11 1.0E12 1.2E12 y=2.43e *x ** is significant at the 0,01 level (2 tailed). correlati: Moldova, Table 15 correlati: Moldova Figure ** N ** N ** N ** 1 N E11 R 2 Linear = E11 8.0E10 6.0E10 4.0E10 2.0E10 y=2.29e *x 0.0E0 2.0E9 4.0E9 6.0E9 ** is significant at the 0,01 level (2 tailed). 394 Public Finance Quarterly 2017/2

16 Poland Poland has spent 75.8% and 13.4% of public expenditure for transport and agriculture (Table 2, in 2013), respectively. On the other hand, the output of the agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 16 and Figure 12). Russian Federati The Russian government has spent 14.8% of public expenditure for agriculture (Table 2, in 2013). On the other hand, the output of the agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 17 and Figure 13). Ukraine The Ukrainian government has spent 31.3% and 15.7% of the public expenditure for energy and fuel (due to the dependence oil and gas import) and agriculture (Table 2, in 2013), respectively. By all means, the output of the agriculture has been more than the all of the countries (Table 3, in 2014). At the same time, there is a perfect positive linear relatiship between expenditure and in the period (see Table 18 and Figure 14). correlati: poland, Table 16 correlati: poland Figure ** N ** 1 N E12 1.5E E12 1.0E12 7.5E11 y=5.34e *x 2.0E10 4.0E10 6.0E10 8.0E10 R 2 Linear = ** is significant at the 0,01 level (2 tailed). Public Finance Quarterly 2017/2 395

17 Table 17 correlati: russian fed., correlati: russian federati Figure E13 R 2 Linear = ** 0.885** 1 4.0E13 2.0E13 0.0E0 y=1.12e *x 0.0E0 1.0E12 2.0E12 3.0E12 4.0E12 5.0E12 6.0E12 ** is significant at the 0,01 level (2 tailed). correlati: ukraine, Table 18 correlati: ukraine Figure E E12 R 2 Linear = ** 0.886** 1 1.0E12 7.5E11 5.0E11 2.5E11 0.0E0 2.0E10 4.0E10 6.0E10 y=2.51e *x ** is significant at the 0,01 level (2 tailed). 396 Public Finance Quarterly 2017/2

18 Lithuania Lithuania has spent 38% and 26.8% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. On the other hand, the output of the agriculture has been less than the other sectors (Table 3, in 2014). At the same time, there is a strg positive linear relatiship between expenditure and in the period (see Table 19 and Figure 15). Uzbekistan The Uzbekistan government has spent 38.4% and 36.9% of public expenditure for (Table 2, in 2013) transport and agriculture, respectively. By all means, the output of the agriculture has been more than the all of the countries (Table 3, in 2014). At the same time, there is a strg positive linear relatiship between expenditure and in the period (see Table 20 and Figure 19). Cclusi This research investigates the potential relatiship between gross output and public expenditure in the selected countries: OECD members: Hungary, the Slovak Republic, Slovenia, Poland; Post-Soviet Uni states: Latvia, Lithuania, Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, the Russian Federati, the Ukraine, Uzbekistan; Countries that fall into both categories: Estia. Another key issue for the study is to create clusters according to public expenditure, as percentages of. For purpose, the correlati: lithuania, Table 19 correlati: lithuania Figure ** N ** N E10 R 2 Linear = E10 y=5.57e *x 2.5E10 2.0E10 1.5E10 6.0E8 8.0E8 1.0E9 1.2E9 1.4E9 1.6E9 ** is significant at the 0,01 level (2 tailed). Public Finance Quarterly 2017/2 397

19 Table 20 Figure 16 correlati: uzbekistan, correlati: uzbekistan 1.4E12 R 2 Linear = ** N E12 1.0E12 y=1.44e *x 0.994** E13 3.0E12 4.0E12 5.0E12 6.0E12 N 4 4 ** is significant at the 0,01 level (2 tailed). author used IMF and World Bank data from the period. Certain European countries preferred making cuts in public expenditure after the global financial crisis of However, the results of the correlati analysis show that there are strg and/or perfect linear relatiships between and expenditure. Accordingly, the cluster analysis has classified the countries into two groups. It can be ccluded that the distance between the clusters is not significant. Thus, the main comm feature is that public expenditure social (including housing, community amenities, health, recreati, culture, religi, educati, social protecti) has been a priority for all countries in The Russian Federati, Hungary and Belarus have spent the highest percentage of expenditure general public services. On the ctrary, Azerbaijan and Georgia have spent the main part of the public expenditure to the and defence, public order, safety, envirment protecti respectively. Altogether, the distributi of public spending has been varied due to the different potential in each country. All things csidered, as the result of the cluster analysis, Lithuania, Azerbaijan, Georgia, Kazakhstan, the Russian Federati, Uzbekistan are in the first cluster, and Estia, Latvia, the Slovak Republic, Slovenia, Hungary, Poland, Belarus, Moldova and the Ukraine are in the secd cluster. In comparis with the secd cluster, lower expenditure social (Azerbaijan, Georgia, the Russian Federati), higher spending defence, public order and safety and envirmental protecti (in all countries) are the main features of the first cluster. Azerbaijan, Kazakhstan and the Russian Federati are the main oil and gas export- 398 Public Finance Quarterly 2017/2

20 ers amg the countries examined thus, in light of the above, oil and gas revenues have a substantial impact their fiscal policy. Accordingly, the Azerbaijan government has spent 43.2% of total expenditure (15.6% of ), particularly mining, manufacturing and cstructi due to its dependence the oil and gas sectors. In additi, the Russian Federati has spent 22.6% of total expenditure (9.5% of ) general public services account of huge administrative costs. In the secd cluster, the shares of expenditure social (Latvia, Slovenia, the Ukraine), defence, public order and safety, and envirmental protecti (Estia, Latvia, the Ukraine), and (Slovenia, Hungary, Latvia) as a percentage of have been greater than in other countries. Notably, the Hungarian government has spent 20.9% of total public expenditure (10.4% of ) general public services. In summary, the selected countries have spent more social (with some exceptis), and the relatiship between and public expenditure has been strg. However, some of the countries have to decrease public expenditure general public services, and have to increase the percentage of expenditure and social (particularly, Azerbaijan, Kazakhstan and Georgia), and the oil and gas producers (Azerbaijan, Kazakhstan, the Russian Federati) have to diversify the ecomy with efficient fiscal policy. References Abdullaev, B. Kya, L. (2014): Growth Maximizing Tax Rate for Uzbekistan. Applied Ecometrics and Internatial Development, 14(1), pp Aleksandrova, M. (2013): Fiscal policy effects growth. World Applied Sciences Journal, 22(7), pp Aslanli, K. (2015): Fiscal sustainability and the State Oil Fund in Azerbaijan. Journal of Eurasian Studies, 6(2), pp Azhgaliyeva, D. (2014): The effect of fiscal policy oil revenue fund: The case of Kazakhstan. Journal of Eurasian Studies, 5(2), pp Barro, R. J. Gord, D. B. (1989): Rules, discreti and reputati in a model of metary policy. Journal of metary s, 12(1), pp Chirachi, C. (2015): Metary and Fiscal Policy Interacti and the Relatiship between the Central Bank and the Government (The Case of Republic of Moldova). Journal of Danubian Studies and Research, 5(1) Eckardt, S., Martinez-Vazquez, J. Timofeev, A. (2014): Efficiency Cost of Fiscal Equalizati: The Case of Belarus (Paper No. 1401). Internatial Centre for Public Policy, Andrew Young School of Policy Studies, Georgia State University Endrit L. Drini I. (2013): Searching for Political Fiscal Cycles in Hungary. Ctemporary Ecomics, 7(4), pp Goryunov, E., Kazakova, M., Kotlikoff, L. J., Mamedov, A., Nesterova, K., Nazarov, V., Grishina, E., Trunin, P. Shpenev, A. (2013): Russia s fiscal gap (No ). Natial Bureau of Ecomic Research Public Finance Quarterly 2017/2 399

21 Goryunov, E., Kotlikoff, L. Sinelnikov- Murylev, S. (2015): The fiscal gap: An estimate for Russia. Russian Journal of Ecomics, 1(3), pp Raudla, R. Kattel, R. (2011): Why did Estia choose fiscal retrenchment after the 2008 crisis? Journal of public policy, 31(02), pp Grigoli, F. (2012): Public in the Slovak Republic: Compositi and Technical Efficiency Касперовіч-Степієн, А. (2015): Fiscal csolidati in the Baltic states. Фінансово-кредитна діяльність: проблеми теорії та практики, (1), pp Romesburg, C. (2004): Cluster analysis for researchers. en&lr=&id=zuipv7okm10c&oi=fnd&pg=p R5&dq=cluster+analysis&ots=7EVI2g66b&sig =lbwi73kcreeitbkuyald12nop3a&redir_ esc=y#v=epage&q=cluster%20analysis&f=false Kazandziska, M. (2015): Macro policy regime in Poland (No. 59/2015) Klyvienė, V. (2014): Macro effects of fiscal policy in Lithuania, Latvia and Estia (Doctoral dissertati, Vilnius University) Mkhatrishvili, S. Zedginidze, Z. (2015): Modeling Macro-Fiscal Interlinkages: Case of Georgia. Central European Journal of Ecomic Modelling and Ecometrics, 7(1), pp Setnikar, C. S. Petkovšek, V. (2014): Fiscal Instability in Slovenia during the Ecomic Crisis. Zagreb Internatial Review of Ecomics and Business, 17(1), pp IMF (2014): Government Finance Statistics data.imf.org/?sk=5804c5e BDCD 671BCDC565A World Bank (2014): topic/ecomy-and-growth Public Finance Quarterly 2017/2