The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
With the global financial crisis hitting many countries, policymakers around the world have been weighing different countercyclical policies to support aggregate demand and restore growth. The analysis in this paper estimates a Structural Vector Er...
| Main Authors: | , |
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| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091021163608 http://hdl.handle.net/10986/4279 |
| Summary: | With the global financial crisis hitting
many countries, policymakers around the world have been
weighing different countercyclical policies to support
aggregate demand and restore growth. The analysis in this
paper estimates a Structural Vector Error Correction model
for Tunisia in order to identify the impact of fiscal policy
shocks on real output. The authors find that public
investment has a small impact on output in the short run but
is an important medium-term growth-enhancing countercyclical
instrument that has a robust impact on growth. Raising
public investment by 1 dinar yields 0.12 dinar the first
year, 0.30 dinar the second year, half a dinar the third
year, and 1.08 dinars the sixth year. An increase in
recurrent expenditure has a smaller but positive and
persistent impact on real output. For Tunisia to obtain a
larger short-term impact of public spending on output,
procurement processes should be made faster and simpler.
Finally, the analysis finds a countercyclical pattern of
real public investment vis-à-vis real output and a relative
rigidity/inelasticity of recurrent expenditures to output fluctuations. |
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