Buoyant Capital Spending and Worries Over Real Appreciation
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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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 07/286.
Date of creation: 01 Dec 2007
Date of revision:
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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.
- Kangni Kpodar & Boileau Loko & Oumar Diallo, 2011. "Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria," Working Papers halshs-00556935, HAL.
- NEP-ALL-2008-01-26 (All new papers)
- NEP-ENE-2008-01-26 (Energy Economics)
- NEP-MAC-2008-01-26 (Macroeconomics)
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