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Threshold effect of fiscal policy on private consumption : Evidence from Tunisia

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  • Wissem Khanfir

Abstract

Using a threshold regression model, we analyse the impact of fiscal policy on private consumption in Tunisia, over the 1975-2010 period. Our empirical results revealed that public expenditure and tax revenues have Keynesian effects on consumption, when private debt/GDP ratio is below 48 %. This effect becomes non-Keynesian once this threshold is exceeded. We provide empirical evidence that private consumption reacts in non-linear fashion to changes in fiscal policy.

Suggested Citation

  • Wissem Khanfir, 2016. "Threshold effect of fiscal policy on private consumption : Evidence from Tunisia," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 95-110, March.
    • Handle: RePEc:rej:journl:v:18:y:2016:i:59:p:95-110
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    More about this item

    Keywords

    Fiscal Policy; Private consumption; Threshold regression model; Tunisia;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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