IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/v4y2014i10p1314-1331id1261.html
   My bibliography  Save this article

The Sustainability of Fiscal Adjustment Process : A Quantitative Approach With an Application to Tunisia

Author

Listed:
  • Salem Kanoun

Abstract

This study is a contribution to the literature concerning the sustainability of fiscal deficits in emerging economies. A novelty in this article is an attempt to check the sustainability of fiscal adjustment process monitored by fiscal authorities. Running accounting model for the fiscal disequilibrium in Tunisia over the period 1976-2010 shows sustainable thresholds of fiscal deficits and helps to quantify the related required fiscal adjustment for each year. Using bivariate cointegration test and a dynamic Error Correction Model to check the short and long run relationships between primary deficits and sustainable thresholds, this study found evidence to authorities’ ability and willingness to adjust: if the primary fiscal deficit has increased above its long-run ratio, the primary fiscal deficit will decrease in the following period to restore the long run equilibrium with a high significant speed to adjust. As a guide to possible future policy actions, the realized fiscal buffers until 2010 help to withstand “Arab Spring” Revolution crisis which started in 2011 and may provide additional support for actual expansionary fiscal policy and allow more room for manoeuvre to ensure political transition to democracy. Nowadays, Tunisia is faced with diminished policy space and after the forthcoming elections, authorities’ ability and willingness to adjust could be the strong link in the upturn in public finance disequilibrium.

Suggested Citation

  • Salem Kanoun, 2014. "The Sustainability of Fiscal Adjustment Process : A Quantitative Approach With an Application to Tunisia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1314-1331.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:10:p:1314-1331:id:1261
    as

    Download full text from publisher

    File URL: https://archive.aessweb.com/index.php/5002/article/view/1261/1794
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Helder Ferreira de Mendonça & Gabriela Elise Auel, 2016. "The effect of monetary and fiscal credibility on public debt: empirical evidence from the Brazilian economy," Applied Economics Letters, Taylor & Francis Journals, vol. 23(11), pages 816-821, July.
    2. Samia Omrane Belguith & Foued Badr Gabsi, 2019. "Public Debt Sustainability in Tunisia: Empirical Evidence Estimating Time-Varying Parameters," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 550-560, June.
    3. Helder Mendonça & Felipe Tostes, 2015. "The Effect of Monetary and Fiscal Credibility on Exchange Rate Pass-Through in an Emerging Economy," Open Economies Review, Springer, vol. 26(4), pages 787-816, September.

    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:asi:aeafrj:v:4:y:2014:i:10:p:1314-1331:id:1261. 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: Robert Allen (email available below). General contact details of provider: https://archive.aessweb.com/index.php/5002/ .

    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.