Cyclical Behavior of Fiscal Policy among Sub-Saharan African Countries
Departmental Papers, August 24, 2016
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Bibliographic details
- Authors: Tetsuya Konuki, Mauricio Villafuerte
- Published: August 24, 2016
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9781513563541.087
Executive summary and central findings
- Excessively procyclical fiscal policy can be harmful.
- The paper investigates the extent of fiscal procyclicality among sub-Saharan African countries in recent years and the drivers of that procyclicality.
- Key empirical findings:
- A tendency for procyclical fiscal policy was particularly pronounced among oil exporters.
- Procyclicality was especially pronounced after the global financial crisis.
- There is a statistically significant causal link running from deeper financial markets and higher reserves coverage to lower fiscal policy procyclicality.
- Policy-relevant inference:
- Fiscal rules supported by strong political commitment and institutions appear to be key to facilitating progress toward deeper financial markets and stronger reserves coverage, which in turn reduce fiscal procyclicality.
Thematic focus and keywords
- Subject areas: Financial sector policy and analysis, Fiscal policy, Fiscal stance, Output gap, Procyclical fiscal policy, Procyclicality, Production
- Keywords (as listed): African country, countercyclical fiscal policies, country, DP, DPPP, fiscal policy anchor, fiscal policy in the region, fiscal policy management, fiscal policy principle, fiscal policy Procyclicality, fiscal policy stance, Fiscal stance, GDP, Global, Nonresource output gaps, Output gap, price, Procyclical fiscal policy, Procyclicality, resource fund, resource revenue, Sub-Saharan Africa, way fiscal policy
Implications for policymakers and institutions
- Strengthening financial market depth and increasing reserves coverage are associated with reduced fiscal procyclicality.
- Implementing and enforcing fiscal rules, backed by strong political commitment and institutions, is important to support the structural conditions (deeper financial markets, stronger reserves coverage) that mitigate procyclical fiscal responses.
Departmental Paper No. 2016/009 — "Cyclical Behavior of Fiscal Policy among Sub-Saharan African Countries" by Tetsuya Konuki and Mauricio Villafuerte, August 24, 2016.