Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria

Kangni Kpodar, Oumar Diallo () and Boileau Loko
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Oumar Diallo: Centre d'Etudes et de Recherches sur le Développement International(CERDI)

No 200804, Working Papers from CERDI

Abstract: The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.

Keywords: Government capital expenditure; Real exchange rate; Oil (search for similar items in EconPapers)
Pages: 22
Date: 2008
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Working Paper: Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cdi:wpaper:960

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