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Cyclical fiscal policy in developing countries: the case of Africa

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Abstract

The paper documents three pieces of empirical evidence on fiscal policy in Africa. First, a bigger government increases the volatility of output growth. Second, fiscal policy has substantially Keynesian effects. Third, fiscal policy instruments in Africa behave either pro-cyclically or a-cyclically, but practically never counter-cyclically. Taken together, these three findings imply that fiscal policy does not contribute to output stabilization. Quite the contrary, in several African countries fiscal policy is a source of volatility. Given the large development costs of volatility, ways to encourage the adoption of a counter-cyclical fiscal policy stance are then discussed.

Suggested Citation

  • Fabrizio Carmignani, "undated". "Cyclical fiscal policy in developing countries: the case of Africa," MRG Discussion Paper Series 2408, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uqmrg6:24
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    File URL: https://economics.uq.edu.au/files/46956/2408.pdf
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