IDEAS home Printed from
   My bibliography  Save this paper

Fiscal Policy Institutions and Economic Transition in North Africa


  • Baldi, Guido


Sound public finances are crucial for ensuring a successful transformation of transition countries to democratic market economies. The transition countries in North Africa are an important example for this. These countries experienced increasing budget deficits in 2011 and 2012. Public finances will probably remain a serious issue in the coming years due to political uncertainties, distributional struggles and weak world economic growth. What kind of institutional rules for the budget process are suitable to limiting the size of these potential budget deficits in a new democracy? In this paper, I argue that numerical fiscal restraints are not the right tool to reduce budget deficits in a new and fragile democracy. Instead, I hold the view that a strong finance minister and a transparent budget process are much more important than numerical fiscal rules. Assigning prerogatives to the finance minister allows limiting the political deficit bias that may arise due to distributional struggles over government spending and revenue. History has shown that numerical policy rules on their own do not lead to desirable outcomes if they are not supported and embedded by the main political parties. If there are weak institutions, fiscal policy rules might even have a perverse effect when politicians – in trying to comply with the rules – use optimistic forecasts and creative accounting, which would lead to a deterioration of the actual budget situation. Therefore, transition countries should first focus on improving the transparency and accountability of the budget process.

Suggested Citation

  • Baldi, Guido, 2013. "Fiscal Policy Institutions and Economic Transition in North Africa," MPRA Paper 48677, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:48677

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Lars Calmfors & Simon Wren‐Lewis, 2011. "What should fiscal councils do?," Economic Policy, CEPR;CES;MSH, vol. 26(68), pages 649-695, October.
    2. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
    3. Marco Buti & João Nogueira Martins & Alessandro Turrini, 2007. "From Deficits to Debt and Back: Political Incentives under Numerical Fiscal Rules," CESifo Economic Studies, CESifo, vol. 53(1), pages 115-152, March.
    4. Jean-Paul Fitoussi & Francesco Saraceno, 2008. "Fiscal Discipline as a Social Norm: The European Stability Pact," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1143-1168, December.
    5. von Hagen, Jurgen & Wolff, Guntram B., 2006. "What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3259-3279, December.
    6. Kerstin Bernoth & Guntram B. Wolff, 2008. "Fool The Markets? Creative Accounting, Fiscal Transparency And Sovereign Risk Premia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(4), pages 465-487, September.
    7. Milesi-Ferretti, Gian Maria, 2004. "Good, bad or ugly? On the effects of fiscal rules with creative accounting," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 377-394, January.
    8. Adeel Malik and Bassem Awadallah, 2011. "The economics of the Arab Spring," Economics Series Working Papers WPS/2011-23, University of Oxford, Department of Economics.
    9. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, January.
    10. Adeel Malik & Bassem Awadallah, 2011. "The economics of the Arab Spring," CSAE Working Paper Series 2011-23, Centre for the Study of African Economies, University of Oxford.
    11. Vincent Koen & Paul van den Noord, 2005. "Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting," OECD Economics Department Working Papers 417, OECD Publishing.
    12. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, January.
    13. Amin, Magdi & Assaad, Ragui & al-Baharna, Nazar & Dervis, Kemal & Desai, Raj M. & Dhillon, Navtej S. & Galal, Ahmed & Ghanem, Hafez & Graham, Carol & Kaufmann, Daniel, 2012. "After the Spring: Economic Transitions in the Arab World," OUP Catalogue, Oxford University Press, number 9780199924929.
    14. Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
    15. Alesina, Alberto & Perotti, Roberto, 1996. "Fiscal Discipline and the Budget Process," American Economic Review, American Economic Association, vol. 86(2), pages 401-407, May.
    16. International Monetary Fund, 2010. "The Cyclicality of Fiscal Policy in the Middle East and Central Asia; Is the Current Crisis Different?," IMF Working Papers 10/68, International Monetary Fund.
    17. Lars P. Feld & Gebhard Kirchgassner, 1999. "Public Debt and Budgetary Procedures: Top Down or Bottom Up? Some Evidence from Swiss Municipalities," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 151-180 National Bureau of Economic Research, Inc.
    18. James M. Poterba & Jürgen von Hagen, 1999. "Introduction to "Fiscal Institutions and Fiscal Performance"," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 1-12 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Fiscal Policy Institutions; Numerical Rules; Constitutional Economics;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:48677. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.