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Cyclical Behavior of Fiscal Policy among Sub-Saharan African Countries

Tetsuya Konuki and Mauricio Villafuerte

No 2016/009, IMF Departmental Papers / Policy Papers from International Monetary Fund

Abstract: Excessively procyclical fiscal policy can be harmful. This paper investigates to what extent the fiscal policies of sub-Saharan African countries were procyclical in recent years and the reasons for the degree of fiscal procyclicality among these countries. It finds that a tendency for procyclical fiscal policy was particularly pronounced among oil exporters and after the global financial crisis. It also finds a statistically significant causal link running from deeper financial markets and higher reserves coverage to lower fiscal policy procyclicality. Fiscal rules supported by strong political commitment and institutions seem to be key to facilitating progress for deeper financial markets and stronger reserves coverage.

Keywords: DPPP; DP; country; price; GDP; fiscal policy stance; resource fund; fiscal policy principle; Nonresource output gaps; African country; fiscal policy Procyclicality; countercyclical fiscal policies; fiscal policy in the region; resource revenue; way fiscal policy; fiscal policy management; fiscal policy anchor; Fiscal stance; Procyclical fiscal policy; Output gap; Procyclicality; Sub-Saharan Africa; Global (search for similar items in EconPapers)
Pages: 39
Date: 2016-08-24
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Handle: RePEc:imf:imfdps:2016/009