Empirical Estimation of Fiscal Multipliers in MENA Oil-Exporting Countries with an Application to Algeria

By Maria Elkhdari, Moez Souissi, Andrew Jewell

May 31, 2018

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Maria Elkhdari, Moez Souissi, and Andrew Jewell. Empirical Estimation of Fiscal Multipliers in MENA Oil-Exporting Countries with an Application to Algeria, (USA: International Monetary Fund, 2018) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

At a time when Algeria must undertake considerable fiscal consolidation to restore sustainability, the issue of fiscal multipliers has come to the fore. This paper estimates short-term and long-term fiscal multipliers for Algeria applying several econometric methodologies, including Local Projection Methodology and Vector Autoregressive Models, and using both Algeria-specific and panel data. The paper also explores asymmetries related to the sign of the output gap as well as the direction of spending. The results suggest that (i) average fiscal multipliers for Algeria are generally moderate and below unity; (ii) the impact of public spending shocks is more important when the output gap is negative; (iii) fiscal spending multipliers are significantly larger during spending contraction than expansion; (iv) procyclicality in public spending does not appear to affect output, except for capital spending cuts when the output gap is negative; and (v) while multipliers associated with countercyclical public spending can be sizeable, a contraction in current spending does not materially affect non-oil GDP.

Subject: Capital spending, Current spending, Expenditure, Fiscal multipliers, Fiscal policy, Output gap, Production

Keywords: Algeria, Capital spending, Current spending, Decrease multiplier, East Africa, Fiscal multiplier, Fiscal multipliers, Fiscal policy, Fiscal policy shock, Global, Government expenditure shock, Government spending, Local Projection Methodology, Middle East, North Africa, Oil GDP, Oil-exporting country, Output gap, Output gap dummy, Public spending data, Spending decrease multiplier, Spending direction, Spending multiplier, State-dependent multipliers, Structural Vector Autoregressive Model, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/124
Stock No:

WPIEA2018124
ISBN:

9781484357972
ISSN:

1018-5941

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