Cyclicality of Fiscal Policy in Sub-Saharan Africa: Magnitude and Evolution

34 Pages Posted: 24 Jul 2017 Last revised: 2 Aug 2019

See all articles by César Calderón

César Calderón

World Bank

Punam Chuhan-Pole

World Bank

Rafael Matias Lopez-Monti

George Washington University - Department of Economics

Cesar Calderon

affiliation not provided to SSRN

Date Written: June 22, 2017

Abstract

This paper studies the cyclical aspects of fiscal policy in Sub-Saharan Africa countries during 1970?2014. It compares the cyclical properties of real government consumption in the region with those in other developing regions and high-income countries, and examines whether there has been a change in the cyclical nature of fiscal policy in recent years. The analysis finds that government consumption is procyclical in Sub-Saharan African countries, more so than in other regions, and that accounting for endogeneity increases the degree of cyclicality. The cyclical properties of government spending vary along the business cycle, with the level of cyclicality being larger when the level of real economic activity is above the trend relative to when it is below the trend. Mirroring the pattern in other developing regions, the degree of cyclicality has changed since 2002 in Sub-Saharan Africa, with incipient signs of a shift toward acyclical or more countercyclical policies. The evidence does not suggest that resource wealth or fragility increases the procyclicality of government consumption in Sub-Saharan Africa. Official development assistance is found to exacerbate the procyclical stance of fiscal policy in the region, but the result depends on the relative size of foreign aid received.

Keywords: Macro-Fiscal Policy, Economic Adjustment and Lending, Public Finance Decentralization and Poverty Reduction, Public Sector Economics, Global Environment, Energy and Natural Resources, Coastal and Marine Resources, International Trade and Trade Rules

Suggested Citation

Calderon, Cesar A. and Chuhan-Pole, Punam and Lopez-Monti, Rafael Matias and Calderon, Cesar, Cyclicality of Fiscal Policy in Sub-Saharan Africa: Magnitude and Evolution (June 22, 2017). World Bank Policy Research Working Paper No. 8108, Available at SSRN: https://ssrn.com/abstract=3006133

Cesar A. Calderon (Contact Author)

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States
202-458-7214 (Phone)
202-522-7528 (Fax)

HOME PAGE: http://www.worldbank.org/laceconomist

Punam Chuhan-Pole

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Rafael Matias Lopez-Monti

George Washington University - Department of Economics ( email )

Washington, D.C., DC
United States

Cesar Calderon

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
223
PlumX Metrics