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Non-Linear Effects of Fiscal Policy on Economic Growth: Moroccan Case

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  • Abdenour, Redouan
  • Tounsi, Said

Abstract

In the economic theory, many arguments were advanced to justify the efficiency of the fiscal policy with a view to stabilization. For some, expansionist fiscal policies can have favorable effects on the economic growth, while for others, the economy is always in a global balanced situation, and thus the fiscal policy will have no effect and can be even harmful for the economy. However, these two effects can coexist in the economy, therefore putting forward the nonlinear character of fiscal policy in the economy growth. This study has the objective of appreciating the nature of the relation between fiscal policy and the economic growth in a 36 developing country sample of, taking into account the existence of possible nonlinear effects of the fiscal policy. Due to the use of the methodology of endogenous thresholds, the iterative procedure for the determination of endogenous thresholds developed by Hansen (1996, 1999, 2000) has allowed us to identify an optimal budget deficit threshold of 5,1%, which makes the relation between budget deficit and growth become non-linear. In other words, below this threshold expansionist policies have favorable effects on the economic growth, while above these policies it becomes non-favorable.

Suggested Citation

  • Abdenour, Redouan & Tounsi, Said, 2015. "Non-Linear Effects of Fiscal Policy on Economic Growth: Moroccan Case," MPRA Paper 69830, University Library of Munich, Germany, revised 2016.
    • Handle: RePEc:pra:mprapa:69830
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; Keynesian regime; Threshold effects; Fiscal policy.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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