Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria
AbstractThe Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.
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Date of creation: 18 Jan 2011
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Government capital expenditure; real exchange rate; oil;
Other versions of this item:
- Kangni KPODAR & Oumar DIALLO & Boileau LOKO, 2008. "Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria," Working Papers 200804, CERDI.
- Oumar Diallo & Boileau Loko & Kangni Kpodar, 2007. "Buoyant Capital Spending and Worries Over Real Appreciation," IMF Working Papers 07/286, International Monetary Fund.
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