Macroeconomic impacts of fiscal shocks on the Moroccan economy: a disaggregated SVAR analysis

Youssef Alami, Issam El Idrissi, Ahmed Bousselhami, Radouane Raouf and Hassane Boujettou

Journal of Business and Socio-economic Development, 2021, vol. 2, issue 2, 137-152

Abstract: Purpose - The present paper aims to evaluate the structural impact of exogenously induced fiscal shocks on the Moroccan economy. This entails an analysis of the effect on the GDP of COVID-19-induced fiscal shocks manifesting in terms of budgetary revenues and expenditures. A key aspect of this analysis addresses the size of the tax and fiscal multipliers. Design/methodology/approach - The study examines the structural relationship between five variables during the period between Q1 2009 and Q2 2020 using an SVAR approach that allows for a dynamic interaction between ordinary expenditures and revenues on a quarterly basis. Findings - Positive structural shocks on public spending are likely to negatively impact economic growth. Negative economic growth, in turn, will damage price levels and interest rates, mainly over the long term. However, public-revenue-multiplier-associated shocks exceed these price- and interest-rate multiplier-associated shocks. Indeed, a structural shock to ordinary revenues can have a positive but insignificant impact on the GDP stemming from the ensuing decrease in the government budget deficit that proceeds from the increase in government revenues. Originality/value - This is one of the first studies in the Moroccan context to assess the impact of the current worldwide pandemic on public finances. In addition, this study highlights the importance of boosting economic recovery through public spending.

Keywords: Budgetary shocks; COVID-19; Public finances; Morocco; Structural VAR (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jbsedp:jbsed-08-2021-0112

DOI: 10.1108/JBSED-08-2021-0112

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