Fiscal imbalance and economic growth of Russia
Subject This article examines the impact of the Federal budget deficit on Russia's economic growth and the increasing crowding-out effect.  Objectives The study attempts to trace the relationship between the non-oil deficit of the Federal budget and the growth of Russia's economy within Q1, 2005 to Q1, 2018 (53 quarterly observations).  Methods The study uses the Solow-Swan growth model supplemented by the Deficit and Interest Expense variables. The econometric methodology includes tests for collinearity and stationarity to select explanatory variables. Due to different degree of integratedness of variables, the Autoregressive Distributed Lag model is used.  Results Bounds tests point to a positive long-term relationship between fiscal imbalance and economic growth. One-percent growth of the former was followed by 0,1-percent growth of the latter. Debt service charges, while having the expected symbol, statistically are insignificant. As for the short-run dynamics, it took economic agents three and a half quarters to restore the balance between dependent and independent variables.  Conclusions The study found no evidence of crowding-out. Rather, the debt burden was offset by the capital expenditure financed by borrowed funds that increased Russia's national income.