The Asymmetric Effect of Fiscal Deficit on Macroeconomic Variables in Sub Saharan Africa

In most African countries, the intervening fluctuations in sources of government revenue and the endearing corruption as well as mis-prioritisation of the needs of citizens have been noted as the basic reasons behind the high incidence of fiscal deficit over the years. Therefore, this study attempts to examine the asymmetric effect of fiscal deficit on macroeconomic variables in Sub-Saharan Africa using quarterly data between 1990 and 2020. The study employed Non-Linear ARDL model to estimate the asymmetric effect of fiscal deficit on macroeconomic variables in Sub-Saharan Africa. The long run asymmetric effect of fiscal deficit revealed that the influence of fiscal deficit on macroeconomic variables employed in the study was positive but insignificant before the global financial crisis and it means that the influence was asymmetric. However, after the global financial crisis, fiscal deficit exerted negative and significant effects on macroeconomic variables in the selected African countries. This shows symmetric effect. Furthermore, it was discovered that the impact of fiscal deficit on macroeconomic variables was significant with different magnitudes from different countries. The study concluded that the effect of fiscal deficit on macroeconomic variables in Sub-Saharan Africa countries is symmetric and asymmetric respectively. Therefore, the government of the selected countries should formulate workable policies that will improve tax collection, particularly direct and indirect taxes, mostly importantly, by implementing reforms that would enhance the revenue through which growth and macroeconomic variables can be stabilized. Additionally, governments in the selected African countries should endeavour to jettison and reduce various activities that are eroding the revenue of the economy so that the resources available can be directed to economic sectors and important areas that can boost growth and enhance stability of macroeconomic variables in these countries.