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Linkages Between Fiscal Debt Sustainability, Growth And Poverty: An Application To Tunisia

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  • Salem Kanoun

    ()
    (Business Higher School/ Manouba University/Tunisia)

Abstract

With the view to deal with the shortcoming of the existing approach regarding explicit links between public and external debt sustainability and poverty reduction, this chapter attempts to provide an empirical investigation on these links. Both the direct and indirect channels are considered to highlight the relationships between sustainable indicators, per capita growth and poverty reduction. The Tunisian case shows that real per capita GDP growth is related positively to sustainable thresholds of budget deficit and current account deficit; and negatively to the required fiscal and external adjustments; and sustainable indicators are significantly and positively related to poverty reduction indicators. Indeed, the willingness to implement fiscal and external adjustments, the flexibility in timing adjustment, and good institutional and macroeconomic conditions are crucial issues for conciliating sustainability, per capita growth and poverty reduction. However, temporary persistence of fiscal and/or external adjustment –unsustainable position – or a trade-off between external and fiscal sustainability can be a solution to reduce poverty using direct and indirect reducing poverty public expenditures.

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Bibliographic Info

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This chapter was published in:

  • João Sousa Andrade & Marta C. N. Simões & Ivan Stosic & Dejan Eric & Hasan Hanic (ed.), 2012. "Managing Structural Changes - Trends and Requirements," Books, Institute of Economic Sciences, edition 1, volume 1, number msc, December.
    This item is provided by Institute of Economic Sciences in its series Book Chapters with number msc-12.

    Handle: RePEc:ibg:chaptr:msc-12

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    Related research

    Keywords: Fiscal sustainability; external sustainability; adjustment; per capita growth and poverty reduction;

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    1. BERLAGE, Lodewijk & CASSIMON, Danny & DRÈZE, Jacques & REDING, Paul, . "Prospective aid and indebtedness relief: a proposal," CORE Discussion Papers RP -1660, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Paul R. Krugman, 1988. "Financing vs. Forgiving a Debt Overhang," NBER Working Papers 2486, National Bureau of Economic Research, Inc.
    3. Michael Grimm & Isabel Günther, 2007. "Growth and Poverty in Burkina Faso: A Reassessment of the Paradox," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 16(1), pages 70-101, January.
    4. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
    5. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
    6. Kathrin Berensmann, 2004. "New ways of achieving debt sustainability beyond the enhanced HIPC Initiative," Intereconomics: Review of European Economic Policy, Springer, vol. 39(6), pages 321-330, November.
    7. Sushanta Mallick & Brigitte Granville, 2005. "How best to link poverty reduction and debt sustainability in IMF-World Bank models?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 67-85.
    8. Sami Bibi, 2005. "When is Economic Growth Pro-Poor? Evidence from Tunisia," Cahiers de recherche 0522, CIRPEE.
    9. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, vol. 70(1), pages 99-126, January.
    10. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
    11. Cassimon, Denis & Moreno-Dodson, Blanca & Wodon, Quentin, 2008. "Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts," MPRA Paper 11077, University Library of Munich, Germany.
    12. Annalisa Fedelino & Alina Kudina, 2003. "Fiscal Sustainability in African HIPC Countries," IMF Working Papers 03/187, International Monetary Fund.
    13. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Stephan Klasen, 2005. "Economic Growth and Poverty Reduction: Measurement and Policy Issues," OECD Development Centre Working Papers 246, OECD Publishing.
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