Detecting and date-stamping unsustainability: The case of Tunisian Budget Deficit

This study shows the existence of unsustainability in the Tunisian budget deficit with a new recursive unit root test method. The result of the structural breaks unit root test seems to have been coarser for a period of 39 years, that is why we tried to find a finer result in the recursive tests by a technique of detection of explosiveness periodically collapsing, i.e. the dates of the exuberance of the Tunisian budget deficit. GSADF is a test that give more refined results since it detects the episodes of exuberance of the Tunisian deficit throughout the whole period. It goes without saying that these episodes are compatible with the events experienced in Tunisia such as Black Thursday, the bread riots, the subprime crisis, the 2011 Revolution, political instability, a lack of dynamism in economic activity, etc. The empirical findings provide evidence for the existence of exuberance in the Tunisian budget deficit over the period and date explosiveness and collapse. The implication for the conduct of sustainability of Tunisian budget deficit is that the Tunisian authorities should reduce the excess of fluctuations in explosive budget deficit and impose restriction policies to reduce public spending and increase investments in both public and private sectors.