 Fiscal asymmetries and debt crises: Evidence from Lebanon using a sign restricted structural VAR modelSimon Neaime, Nasser Badra and Isabelle Gaysset The Journal of Economic Asymmetries, 2023, vol. 28, issue C Abstract: This study identifies empirically Lebanon's fiscal asymmetries and shocks and traces their effects on GDP using a sign-restricted structural VAR approach. Following Arias et al.’s (2018) identification procedure of sign and zero restrictions, our empirical findings point to a sluggish effect of fiscal policy on economic activity, stipulating that fiscal policy is conducted with non-Keynesian features. The study also documents evidence in favor of crowding out effects given that central government's borrowings are mainly from the local financial market. Moreover, with a non-Keynesian effect of fiscal policy, policy makers should refrain from using fiscal tools to counteract business-cycle fluctuations. It is shown that in order to break through government expenditure's inefficiency, the government must curb a rising budget deficit, which is harnessing an increasing cost of capital and impinging negatively on debt and its service. A rising sovereign debt, in turn, has subsequently triggered a sovereign debt crisis in October 2019. Keywords: Lebanon'S debt crisis; Structural VAR; Fiscal shocks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:28:y:2023:i:c:s1703494923000464 DOI: 10.1016/j.jeca.2023.e00334 Access Statistics for this article The Journal of Economic Asymmetries is currently edited by A.G. Malliaris More articles in The Journal of Economic Asymmetries from Elsevier |
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