The impact of fiscal consolidations on growth in sub-Saharan Africa

Francisco Arizala (), Jesus Gonzalez-Garcia (), Charalambos Tsangarides and Mustafa Yenice ()
Additional contact information
Francisco Arizala: International Monetary Fund
Jesus Gonzalez-Garcia: International Monetary Fund
Mustafa Yenice: International Monetary Fund

Empirical Economics, 2021, vol. 61, issue 1, No 1, 33 pages

Abstract: Abstract This paper examines the output effects of changes in public expenditure and revenue in sub-Saharan African countries during 1990–2016. Fiscal multipliers in sub-Saharan Africa are somewhat smaller than those estimated in the literature for advanced and emerging economies. The effect of changes in fiscal policy on output depends on the composition: Cutting public investment has a larger effect on output than cutting public consumption or raising revenue. Episodes of fiscal consolidation have short- and medium-term output effects, but here, too, composition matters: Fiscal consolidations based on reducing public investment have the largest effect on output, while fiscal consolidations based on revenue mobilization are less harmful. These findings suggest that the negative impact on growth can be mitigated through the design of fiscal adjustment.

Keywords: Growth; Fiscal consolidations; Fiscal multipliers; Local projections; Africa (search for similar items in EconPapers)
JEL-codes: E32 E62 H50 O55 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Working Paper: The Impact of Fiscal Consolidations on Growth in Sub-Saharan Africa (2017)
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DOI: 10.1007/s00181-020-01863-x

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