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Does Fiscal Illusion Impact Budget Policy? A Panel Data Analysis

Author

Listed:
  • Tchouassi G rard

    (Department of Economics, Faculty of Economic and Management, University of Yaound II-Soa, Po Box 18 Soa- Yaound , Cameroon)

  • Ngwen Ngangu

    (Department of Economics, Faculty of Economic and Management, University of Yaound II-Soa, Po Box 18 Soa Yaound , Cameroon.)

Abstract

This study employs a panel data analysis to examine the relationship between fiscal illusion and budget policy of 15 African countries over the period between 1980 and 2012. The empirical results of the test of Hausman suggest the use of fixed effects estimators. But to check the robustness of the empirical results in different econometric specifications we have also conducted many regressions using alternative estimation methods (such as random effect and population averaged models). Empirical results obtained show a positive and significant association between fiscal illusion and public deficit. An increasing of 1 percent of fiscal freedom leads respectively to, ceteris paribus, an augmentation of 0.27, 0.24 and 0.3 percent of budget deficit in the fixed, random and population method. As a conclusion, fiscal illusion affects budget policy.

Suggested Citation

  • Tchouassi G rard & Ngwen Ngangu, 2015. "Does Fiscal Illusion Impact Budget Policy? A Panel Data Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 240-248.
    • Handle: RePEc:eco:journ1:2015-01-19
    as

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    References listed on IDEAS

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    Cited by:

    1. Tchouassi, Gérard & Nkabkob Londjou, Thio'mi, 2022. "Budgetary principles in the Cemac zone : effectiveness or efficiency," MPRA Paper 113071, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal illusion; Public deficit; Public debt; Government policy; Panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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