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The Impact of Fiscal Policy on Economic Activity Over the Bsiness Cycle: An Emirical Investigation in the Case of Algeria

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  • Abderrahim Chibi

    (Faculty of Economics ana Managment, Tlemcen University, Algeria)

  • Mohamed Benbouziane
  • Sidi Mohamed Chekouri

Abstract

This paper estimates the effects of fiscal policy on Algerian economic activity using a Markov Switching Vector Autoregressive (MSVAR) model. We find evidence of asymmetric effects of fiscal policy across regimes, defined by the state of the business cycle (two situations: recession and boom). The results show small positive government spending and revenue multipliers in the short term in both regimes. In addition, fiscal policy shocks have a stronger impact in times of economic stress than in times of expansion, which confirm and consolidate the hypothesis of asymmetric effects. However, the impact of government spending is stronger than the impact of public revenue in recession periods. On the other hand, fiscal policy decision-makers interact with an Anti -Keynesian view (procyclical), as they raise revenue and expenditure in the case of boom and vice versa in the case of a recession.

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  • Abderrahim Chibi & Mohamed Benbouziane & Sidi Mohamed Chekouri, 2014. "The Impact of Fiscal Policy on Economic Activity Over the Bsiness Cycle: An Emirical Investigation in the Case of Algeria," Working Papers 845, Economic Research Forum, revised Oct 2014.
    • Handle: RePEc:erg:wpaper:845
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    1. Thiombiano, Noel & Ouedraogo, Salifou & Moussa, Abiboulaye, 2022. "Fiscal policy rules and economic fluctuations in the countries of the West African Economic and Monetary Union (WAEMU)," Research in Economics, Elsevier, vol. 76(3), pages 252-263.
    2. Abderrahim Chibi & Sidi Mohamed Chekouri & Mohamed Benbouziane, 2019. "Debt sustainability, structural breaks and nonlinear fiscal adjustment: empirical evidence from Algeria," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 66(4), pages 369-397, December.
    3. Makambi, Steve & Muhindi, Reuben & Nduku, Gillian, 2017. "Influence of bank lending to the government on private sector credit in Kenya: A fiscal deficit specification," KBA Centre for Research on Financial Markets and Policy Working Paper Series 18, Kenya Bankers Association (KBA).
    4. Abderrahim Chibi & Sidi Mohamed Chekouri & Mohamed Benbouziane, 2019. "The dynamics of fiscal policy in Algeria: sustainability and structural change," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-27, December.
    5. Samer Mehibel & Yacine Belarbi, 2018. "Inflation Dynamics in Algeria," Journal of Economics and Behavioral Studies, AMH International, vol. 9(6), pages 174-187.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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