IDEAS home Printed from https://ideas.repec.org/a/oup/jafrec/v25y2016i4p548-579..html
   My bibliography  Save this article

The Cyclical Nature of Fiscal Policy in Sub-Saharan Africa

Author

Listed:
  • César Calderón
  • Ha Nguyen

Abstract

Historically, fiscal policy in Sub-Saharan Africa (SSA) has been procyclical. Governments have raised taxes and cut spending in bad times and have expanded the size of the government in good times. Procyclical access to external borrowing and political economy distortions (e.g., common pool problems and asymmetric information) have been mentioned as culprit. The main goal of this article is to document the cyclical properties of fiscal policy in SSA and to test whether the cyclical stance can be influenced by structural and policy features of the economy, namely, institutional quality, policy space, resource abundance and state fragility among others. This article complements the existing literature on SSA by: (i) using an indicator of institutional quality that better captures economic institutions supporting policy frameworks and (ii) testing jointly the influence of structural and policy factors affecting the cyclicality of fiscal policy. Using annual information for 128 countries from 1970 to 2013, this article finds that stronger institutions and ample policy space do help to reduce the degree of procyclicality of fiscal policy for the majority of countries in the region. These findings call for African policymakers to: (i) deepen institutional reforms that will help them deliver sustainable and countercyclical responses and (ii) replenish liquidity and policy buffers in good times so as to be prepared for bad ones.

Suggested Citation

  • César Calderón & Ha Nguyen, 2016. "The Cyclical Nature of Fiscal Policy in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 25(4), pages 548-579.
    • Handle: RePEc:oup:jafrec:v:25:y:2016:i:4:p:548-579.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jae/ejw007
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ribeiro, Ana Paula & Carvalho, Vitor & Sanches, Hélder, 2021. "Debt dynamics and fiscal policy stance in Cape Verde: Is there evidence of pro-cyclical behavior?," MPRA Paper 111305, University Library of Munich, Germany.
    2. Cesar Calderon & Sebastien Boreux, 2016. "Citius, Altius, Fortius: Is Growth in Sub-Saharan Africa More Resilient?," Journal of African Economies, Centre for the Study of African Economies, vol. 25(4), pages 502-528.
    3. Olumide Olusegun Olaoye, 2022. "Sub‐Saharan Africa's debt‐financed growth: How sustainable and inclusive?," African Development Review, African Development Bank, vol. 34(4), pages 443-458, December.
    4. World Bank Group, "undated". "Africa's Pulse, No. 15, April 2017," World Bank Publications - Reports 26485, The World Bank Group.
    5. Tobignaré Yabré & Gervasio Semedo, 2021. "Political stability and fiscal consolidation in sub‐Saharan African countries," The World Economy, Wiley Blackwell, vol. 44(4), pages 1077-1109, April.
    6. Olumide Olusegun Olaoye & Phillip A. Olomola, 2023. "Sub‐Saharan Africa's rising public debt stock: Is there a cause for concern?," South African Journal of Economics, Economic Society of South Africa, vol. 91(1), pages 85-115, March.
    7. Luis Ayala-Cañón & María Jesús Delgado-Rodríguez & Sonia De Lucas-Santos, 2022. "Synchronization and cyclicality of social spending in economic crises," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(4), pages 1153-1187, November.
    8. World Bank Group, "undated". "Africa's Pulse, No. 14, October 2016," World Bank Publications - Reports 25097, The World Bank Group.
    9. Ogunlesi, Ayodeji, 2018. "Agricultural Productivity, Fiscal and Trade Policies Nexus in Sub-Saharan Africa: A Panel Structural Vector Error Correction Model Analysis," MPRA Paper 90202, University Library of Munich, Germany.
    10. Olaoye, Olumide Olusegun & Olomola, P.A., 2022. "Empirical analysis of asymmetry phenomenon in the public debt structure of Sub-Saharan Africa's five biggest economies: A Markov-Switching model," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    11. Robert C. M. Beyer & Lazar Milivojevic, 2021. "Fiscal policy and economic activity in South Asia," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 340-358, February.
    12. Mawejje, Joseph & Odhiambo, Nicholas M., 2022. "The determinants and cyclicality of fiscal policy: Empirical evidence from East Africa," International Economics, Elsevier, vol. 169(C), pages 55-70.
    13. World Bank Group, "undated". "Africa's Pulse, No. 17, April 2018," World Bank Publications - Reports 29667, The World Bank Group.
    14. Idrys Fransmel Okombi, 2021. "Non-Linear Response of Fiscal Policy to the Business Cycle: Empirical Evidence in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 41(3), pages 1097-1112.
    15. Joseph Mawejje & Nicholas M. Odhiambo, 2021. "Uganda's fiscal policy reforms: What have we learned?," Public Budgeting & Finance, Wiley Blackwell, vol. 41(2), pages 89-107, June.
    16. Wirginia Doryñ & Micha³ Mackiewicz & Dorota Wawrzyniak, 2018. "The Role of Institutions in Determining the Cyclical Behavior of Fiscal Policy," Lodz Economics Working Papers 2/2018, University of Lodz, Faculty of Economics and Sociology.
    17. Punam Chuhan-Pole & Cesar Calderon & Gerard Kambou & Sebastien Boreux & Mapi M. Buitano & Vijdan Korman & Megumi Kubota, "undated". "Africa's Pulse, October 2015," World Bank Publications - Reports 22722, The World Bank Group.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jafrec:v:25:y:2016:i:4:p:548-579.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/csaoxuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.