The Impact of Fiscal Policy on Economic Activity over the Business Cycle: An Empirical Investigation in the Case of Algeria

Chibi Abderrahim (), Chekouri Sidi Mohamed () and Mohamed Benbouziane ()
Additional contact information
Chibi Abderrahim: Faculty of Economics, University Centre of Maghnia, Maghnia, Algeria
Chekouri Sidi Mohamed: Faculty of Economics, University Centre of Maghnia, Maghnia, Algeria

Review of Middle East Economics and Finance, 2019, vol. 15, issue 3, 23

Abstract: In this paper, we aim to analyze whether the effect of fiscal policy on economic growth in Algeria differs throughout the business cycle. To tackle this question, we use a Markov Switching Vector Autoregressive (MSVAR) framework. We find evidence of asymmetric effects of fiscal policy through regimes, defined by the state of the business cycle (recession and boom). The results show small positive government spending and revenue multipliers in the short term in both regimes. Most importantly, fiscal policy shocks have a stronger impact in times of economic recession than in times of expansion, which confirm the hypothesis of asymmetric effects. However, the impact of government spending is stronger than the impact of public revenue during recession periods. In addition, fiscal policy decision-makers interact with Anti-Keynesian view (pro-cyclical). Our results imply that there is something to gain by using the "right instrument" at the "right time".

Keywords: fiscal policy; economic activity; nonlinear effect; MSVAR model (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1515/rmeef-2016-0014 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: The Impact of Fiscal Policy on Economic Activity Over the Bsiness Cycle: An Emirical Investigation in the Case of Algeria (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rmeecf:v:15:y:2019:i:3:p:23:n:1

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rmeef/html

DOI: 10.1515/rmeef-2016-0014

Access Statistics for this article

Review of Middle East Economics and Finance is currently edited by Ghassan Dibeh

More articles in Review of Middle East Economics and Finance from De Gruyter
Bibliographic data for series maintained by Peter Golla ().