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The Cyclicality of Fiscal Policies in the CEMAC Region

  • International Monetary Fund

This paper examines fiscal cyclicality in the CEMAC region during 1980-2008. The issue has attracted very little empirical interest but is important if fiscal policies are to play a role in mitigating external shocks that exacerbate economic cycles across the region. We assess whether fiscal policies across these six countries have been procyclical using panel data to elaborate our analysis. Like in other sub-Saharan countries, total public expenditure in the CEMAC is found to be strongly procyclical. This is most pronounced for public investment, which overreacts to output growth with elasticity above 1. We further find that institutional weaknesses and poor governance partly explain this behavior. In contrast, the existence of an IMF-supported program can be a counterbalancing influence in attenuating this bias.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/205.

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Length: 21
Date of creation: 01 Aug 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/205
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  1. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
  2. Mark Aguiar & Gita Gopinath, 2004. "Emerging market business cycles: the cycle is the trend," Working Papers 04-4, Federal Reserve Bank of Boston.
  3. Carmignani, Fabrizio, 2010. "Cyclical fiscal policy in Africa," Journal of Policy Modeling, Elsevier, vol. 32(2), pages 254-267, March.
  4. Alberto Alesina & Guido Tabellini, 2005. "Why is fiscal policy often procyclical?," Harvard Institute of Economic Research Working Papers 2090, Harvard - Institute of Economic Research.
  5. Plamen Iossifov & Misa Takebe & Zaijin Zhan & Noriaki Kinoshita & Robert C. York, 2009. "Improving Surveillance Across the Cemac Region," IMF Working Papers 09/260, International Monetary Fund.
  6. Bulír, Ales & Hamann, A. Javier, 2008. "Volatility of Development Aid: From the Frying Pan into the Fire?," World Development, Elsevier, vol. 36(10), pages 2048-2066, October.
  7. Aghion, Philippe & Marinescu, Ioana, 2007. "Cyclical Budgetary Policy and Economic Growth: What Do We Learn From OECD Panel Data?," Scholarly Articles 3350066, Harvard University Department of Economics.
  8. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
  9. Oral Williams & Olumuyiwa Adedeji, 2007. "Fiscal Reaction Functions in the CFA Zone; An Analytical Perspective," IMF Working Papers 07/232, International Monetary Fund.
  10. Gabriela Inchauste & Bernardin Akitoby & Benedict J. Clements & Sanjeev Gupta, 2004. "The Cyclical and Long-Term Behavior of Government Expenditures in Developing Countries," IMF Working Papers 04/202, International Monetary Fund.
  11. Johannes Wiegand, 2004. "Fiscal Surveillance in a Petro Zone; The Case of the CEMAC," IMF Working Papers 04/8, International Monetary Fund.
  12. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 05/4, International Monetary Fund.
  13. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
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