Non-linear effects of fiscal policy on economic growth in Cameroon

Effets non linéaires de la politique budgétaire sur la croissance économique au Cameroun

Louis Henri Ngah Ntiga ()
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Louis Henri Ngah Ntiga: SU - Sorbonne Université

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Abstract: The aim of this paper is to examine the non-linear effects of fiscal policy on economic growth in Cameroon conditional on external public debt. The results confirm the existence of non-linearities in the "fiscal policy-economic growth" relationship. Using Hansen's (2000) logic of threshold models, we observed that the optimal threshold for Cameroon's external debt is 38.98% of GDP. Thus, in a critical regime, fiscal policy is not conducive to economic growth. What's more, when the level of external debt exceeds the threshold of 12.014% of GDP (which corresponds to the current situation in Cameroon), tax revenues have recessionary effects on growth, while current expenditure has expansionary effects. These results point the finger at public authorities to the fact that excessive indebtedness can generate disparities within the economy, and that it's time to find financing other than external debt, such as internal debt and oil revenues. Finally, the State should consider increasing current expenditure, such as personnel costs, in the hope of boosting growth and substantially reducing the tax rates that generate tax revenues.

Keywords: Threshold models; Politique budgétaire Croissance économique Modèles à seuil Fiscal policy Economic growth Threshold models; Politique budgétaire; Croissance économique; Modèles à seuil; Fiscal policy; Economic growth (search for similar items in EconPapers)
Date: 2023-06-12
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