Cyclical fiscal policy in developing countries: the case of Africa

Fabrizio Carmignani ()
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Fabrizio Carmignani: MRG - School of Economics, The University of Queensland, http://www.uq.edu.au/economics/index.html?page=101088

No 2408, MRG Discussion Paper Series from School of Economics, University of Queensland, Australia

Abstract: The paper documents three pieces of empirical evidence on fiscal policy in Africa. First, a bigger government increases the volatility of output growth. Second, fiscal policy has substantially Keynesian effects. Third, fiscal policy instruments in Africa behave either pro-cyclically or a-cyclically, but practically never counter-cyclically. Taken together, these three findings imply that fiscal policy does not contribute to output stabilization. Quite the contrary, in several African countries fiscal policy is a source of volatility. Given the large development costs of volatility, ways to encourage the adoption of a counter-cyclical fiscal policy stance are then discussed.

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Persistent link: http://EconPapers.repec.org/RePEc:qld:uqmrg6:24

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