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The Cyclicality of Fiscal Policies in the CEMAC Region

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  • International Monetary Fund

Abstract

This paper examines fiscal cyclicality in the CEMAC region during 1980-2008. The issue has attracted very little empirical interest but is important if fiscal policies are to play a role in mitigating external shocks that exacerbate economic cycles across the region. We assess whether fiscal policies across these six countries have been procyclical using panel data to elaborate our analysis. Like in other sub-Saharan countries, total public expenditure in the CEMAC is found to be strongly procyclical. This is most pronounced for public investment, which overreacts to output growth with elasticity above 1. We further find that institutional weaknesses and poor governance partly explain this behavior. In contrast, the existence of an IMF-supported program can be a counterbalancing influence in attenuating this bias.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/205.

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Length: 21
Date of creation: 01 Aug 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/205

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Keywords: Multilateral surveillance; Central African Economic and Monetary Community; Economic models; External shocks; Governance; Government expenditures; Public investment; Prices; fiscal policy; expenditure; public expenditure; fiscal policies; government spending; public spending; fiscal balance; government expenditure; total public expenditure; fiscal space; cyclical fiscal policy; tax rates; total expenditure; fiscal stance; fiscal sustainability; public debt; fiscal indicators; fiscal deficits; fiscal authorities; fiscal impulse; fiscal reaction; expenditures; public financial management; fiscal profligacy; fiscal management; fiscal reaction function; fiscal convergence; fiscal balances; fiscal shock; fiscal variables; discretionary fiscal policy; primary fiscal deficits; fiscal policy formulation; discretionary fiscal policies; fiscal policy instruments; expansionary fiscal; expansionary fiscal policies; primary fiscal balance; tax base; fiscal reaction functions; expenditure control; expenditure envelope; level of public spending; public finance; fiscal behavior; fiscal data; fiscal convergence criteria; fiscal stimulus; fiscal performance; fiscal variable; fiscal actions; fiscal response; fiscal discipline;

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References

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  1. Alberto Alesina & Guido Tabellini, 2005. "Why is Fiscal Policy often Procyclical?," CESifo Working Paper Series 1556, CESifo Group Munich.
  2. Philippe Aghion & Ioana Marinescu, 2008. "Cyclical Budgetary Policy and Economic Growth: What Do We Learn from OECD Panel Data?," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2007, Volume 22, pages 251-278 National Bureau of Economic Research, Inc.
  3. Carmignani, Fabrizio, 2010. "Cyclical fiscal policy in Africa," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(2), pages 254-267, March.
  4. Plamen Iossifov & Misa Takebe & Zaijin Zhan & Noriaki Kinoshita & Robert C. York, 2009. "Improving Surveillance Across the Cemac Region," IMF Working Papers 09/260, International Monetary Fund.
  5. Oral Williams & Olumuyiwa Adedeji, 2007. "Fiscal Reaction Functions in the CFA Zone," IMF Working Papers 07/232, International Monetary Fund.
  6. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 69-102.
  7. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
  8. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
  9. Gabriela Inchauste & Bernardin Akitoby & Benedict J. Clements & Sanjeev Gupta, 2004. "The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries," IMF Working Papers 04/202, International Monetary Fund.
  10. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund.
  11. Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, Elsevier, vol. 36(10), pages 2048-2066, October.
  12. Johannes Wiegand, 2004. "Fiscal Surveillance in a Petro Zone," IMF Working Papers 04/8, International Monetary Fund.
  13. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 78(1), pages 156-190, October.
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Cited by:
  1. Marcos Poplawski-Ribeiro & Darlena Tartari & Carlos Caceres, 2011. "Inflation Dynamics in the CEMAC Region," IMF Working Papers 11/232, International Monetary Fund.

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