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...

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Main Authors:	Diop, Ndiame, Ben Abdallah, Nizar
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCELERATOR AFFILIATED ORGANIZATIONS AGGREGATE DEMAND BALANCE OF PAYMENT BANK POLICY BANKING SYSTEM BUDGET CONSTRAINT BUDGET DEFICIT BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL FORMATION CENTRAL BANK COMMODITY COMMODITY PRICE COMPARATIVE ADVANTAGE CREDIT GUARANTEES CREDIT MARKETS CREDITORS CURRENT ACCOUNT DEFICIT DEBT MANAGEMENT DEBT REDUCTION DEBT STOCK DEFLATORS DEMAND FOR MONEY DEPOSIT DEVELOPING COUNTRIES DOMESTIC BORROWING ECONOMETRICS ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC THEORY EMERGING ECONOMIES EQUIPMENT EQUIPMENTS EXCESS LIQUIDITY EXCHANGE RATE EXISTING INFRASTRUCTURE EXPORT GROWTH EXPORTS EXPOSURE EXTERNAL BORROWING EXTERNAL DEBT FINANCIAL CRISIS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICIES FISCAL POLICY FISCAL RULE FISCAL STIMULUS FIXED CAPITAL FIXED INTEREST FIXED INTEREST RATES FUTURE GROWTH GDP GDP DEFLATOR GOVERNMENT BUDGET GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS FIXED CAPITAL FORMATION GROWTH RATE HUMAN CAPITAL INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENTS INSTITUTIONAL CONSTRAINTS INSTRUMENT INTEREST PAYMENTS INTEREST RATE INTEREST RATE RISK INTERNATIONAL BANK INTERNATIONAL ECONOMIES INTERNATIONAL MONETARY FUND INVESTMENT BUDGETS LONG-TERM LIABILITIES MACROECONOMIC VARIABLES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET CONSTRAINTS MATURITY MAXIMUM LIKELIHOOD ESTIMATION MONETARY FUND MONETARY POLICY MONETARY TRANSMISSION MULTIPLIERS NEGATIVE SHOCK NOMINAL INTEREST RATE OUTPUT OUTSTANDING PUBLIC DEBT PRIVATE INVESTMENT PRIVATE SAVINGS PRODUCTION COSTS PROFITABILITY PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF INFLATION REAL GDP REAL INTEREST REAL INTEREST RATES REAL TERMS RECURRENT EXPENDITURE RECURRENT EXPENDITURES RESERVES SHORT-TERM INTEREST RATE SHORT-TERM LIABILITIES SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS SOVEREIGN RATING STATISTICAL ANALYSIS STOCK MARKET TAX TAX REVENUE TAX REVENUES WAGES WORLD DEVELOPMENT INDICATORS
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

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spelling	okr-10986-42792021-04-23T14:02:16Z The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia Diop, Ndiame Ben Abdallah, Nizar ACCELERATOR AFFILIATED ORGANIZATIONS AGGREGATE DEMAND BALANCE OF PAYMENT BANK POLICY BANKING SYSTEM BUDGET CONSTRAINT BUDGET DEFICIT BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL FORMATION CENTRAL BANK COMMODITY COMMODITY PRICE COMPARATIVE ADVANTAGE CREDIT GUARANTEES CREDIT MARKETS CREDITORS CURRENT ACCOUNT DEFICIT DEBT MANAGEMENT DEBT REDUCTION DEBT STOCK DEFLATORS DEMAND FOR MONEY DEPOSIT DEVELOPING COUNTRIES DOMESTIC BORROWING ECONOMETRICS ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC THEORY EMERGING ECONOMIES EQUIPMENT EQUIPMENTS EXCESS LIQUIDITY EXCHANGE RATE EXISTING INFRASTRUCTURE EXPORT GROWTH EXPORTS EXPOSURE EXTERNAL BORROWING EXTERNAL DEBT FINANCIAL CRISIS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICIES FISCAL POLICY FISCAL RULE FISCAL STIMULUS FIXED CAPITAL FIXED INTEREST FIXED INTEREST RATES FUTURE GROWTH GDP GDP DEFLATOR GOVERNMENT BUDGET GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS FIXED CAPITAL FORMATION GROWTH RATE HUMAN CAPITAL INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENTS INSTITUTIONAL CONSTRAINTS INSTRUMENT INTEREST PAYMENTS INTEREST RATE INTEREST RATE RISK INTERNATIONAL BANK INTERNATIONAL ECONOMIES INTERNATIONAL MONETARY FUND INVESTMENT BUDGETS LONG-TERM LIABILITIES MACROECONOMIC VARIABLES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET CONSTRAINTS MATURITY MAXIMUM LIKELIHOOD ESTIMATION MONETARY FUND MONETARY POLICY MONETARY TRANSMISSION MULTIPLIERS NEGATIVE SHOCK NOMINAL INTEREST RATE OUTPUT OUTSTANDING PUBLIC DEBT PRIVATE INVESTMENT PRIVATE SAVINGS PRODUCTION COSTS PROFITABILITY PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF INFLATION REAL GDP REAL INTEREST REAL INTEREST RATES REAL TERMS RECURRENT EXPENDITURE RECURRENT EXPENDITURES RESERVES SHORT-TERM INTEREST RATE SHORT-TERM LIABILITIES SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS SOVEREIGN RATING STATISTICAL ANALYSIS STOCK MARKET TAX TAX REVENUE TAX REVENUES WAGES WORLD DEVELOPMENT INDICATORS 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. 2012-03-19T19:13:10Z 2012-03-19T19:13:10Z 2009-10-01 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 English Policy Research working paper ; no. WPS 5087 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Middle East and North Africa Tunisia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCELERATOR AFFILIATED ORGANIZATIONS AGGREGATE DEMAND BALANCE OF PAYMENT BANK POLICY BANKING SYSTEM BUDGET CONSTRAINT BUDGET DEFICIT BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL FORMATION CENTRAL BANK COMMODITY COMMODITY PRICE COMPARATIVE ADVANTAGE CREDIT GUARANTEES CREDIT MARKETS CREDITORS CURRENT ACCOUNT DEFICIT DEBT MANAGEMENT DEBT REDUCTION DEBT STOCK DEFLATORS DEMAND FOR MONEY DEPOSIT DEVELOPING COUNTRIES DOMESTIC BORROWING ECONOMETRICS ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC THEORY EMERGING ECONOMIES EQUIPMENT EQUIPMENTS EXCESS LIQUIDITY EXCHANGE RATE EXISTING INFRASTRUCTURE EXPORT GROWTH EXPORTS EXPOSURE EXTERNAL BORROWING EXTERNAL DEBT FINANCIAL CRISIS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICIES FISCAL POLICY FISCAL RULE FISCAL STIMULUS FIXED CAPITAL FIXED INTEREST FIXED INTEREST RATES FUTURE GROWTH GDP GDP DEFLATOR GOVERNMENT BUDGET GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS FIXED CAPITAL FORMATION GROWTH RATE HUMAN CAPITAL INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENTS INSTITUTIONAL CONSTRAINTS INSTRUMENT INTEREST PAYMENTS INTEREST RATE INTEREST RATE RISK INTERNATIONAL BANK INTERNATIONAL ECONOMIES INTERNATIONAL MONETARY FUND INVESTMENT BUDGETS LONG-TERM LIABILITIES MACROECONOMIC VARIABLES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET CONSTRAINTS MATURITY MAXIMUM LIKELIHOOD ESTIMATION MONETARY FUND MONETARY POLICY MONETARY TRANSMISSION MULTIPLIERS NEGATIVE SHOCK NOMINAL INTEREST RATE OUTPUT OUTSTANDING PUBLIC DEBT PRIVATE INVESTMENT PRIVATE SAVINGS PRODUCTION COSTS PROFITABILITY PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF INFLATION REAL GDP REAL INTEREST REAL INTEREST RATES REAL TERMS RECURRENT EXPENDITURE RECURRENT EXPENDITURES RESERVES SHORT-TERM INTEREST RATE SHORT-TERM LIABILITIES SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS SOVEREIGN RATING STATISTICAL ANALYSIS STOCK MARKET TAX TAX REVENUE TAX REVENUES WAGES WORLD DEVELOPMENT INDICATORS
spellingShingle	ACCELERATOR AFFILIATED ORGANIZATIONS AGGREGATE DEMAND BALANCE OF PAYMENT BANK POLICY BANKING SYSTEM BUDGET CONSTRAINT BUDGET DEFICIT BUSINESS CYCLE BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL FORMATION CENTRAL BANK COMMODITY COMMODITY PRICE COMPARATIVE ADVANTAGE CREDIT GUARANTEES CREDIT MARKETS CREDITORS CURRENT ACCOUNT DEFICIT DEBT MANAGEMENT DEBT REDUCTION DEBT STOCK DEFLATORS DEMAND FOR MONEY DEPOSIT DEVELOPING COUNTRIES DOMESTIC BORROWING ECONOMETRICS ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC THEORY EMERGING ECONOMIES EQUIPMENT EQUIPMENTS EXCESS LIQUIDITY EXCHANGE RATE EXISTING INFRASTRUCTURE EXPORT GROWTH EXPORTS EXPOSURE EXTERNAL BORROWING EXTERNAL DEBT FINANCIAL CRISIS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICIES FISCAL POLICY FISCAL RULE FISCAL STIMULUS FIXED CAPITAL FIXED INTEREST FIXED INTEREST RATES FUTURE GROWTH GDP GDP DEFLATOR GOVERNMENT BUDGET GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS FIXED CAPITAL FORMATION GROWTH RATE HUMAN CAPITAL INFLATION INFLATION RATE INFRASTRUCTURE INVESTMENTS INSTITUTIONAL CONSTRAINTS INSTRUMENT INTEREST PAYMENTS INTEREST RATE INTEREST RATE RISK INTERNATIONAL BANK INTERNATIONAL ECONOMIES INTERNATIONAL MONETARY FUND INVESTMENT BUDGETS LONG-TERM LIABILITIES MACROECONOMIC VARIABLES MACROECONOMICS MARGINAL PRODUCTIVITY MARKET CONSTRAINTS MATURITY MAXIMUM LIKELIHOOD ESTIMATION MONETARY FUND MONETARY POLICY MONETARY TRANSMISSION MULTIPLIERS NEGATIVE SHOCK NOMINAL INTEREST RATE OUTPUT OUTSTANDING PUBLIC DEBT PRIVATE INVESTMENT PRIVATE SAVINGS PRODUCTION COSTS PROFITABILITY PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC INVESTMENT PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF INFLATION REAL GDP REAL INTEREST REAL INTEREST RATES REAL TERMS RECURRENT EXPENDITURE RECURRENT EXPENDITURES RESERVES SHORT-TERM INTEREST RATE SHORT-TERM LIABILITIES SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS SOVEREIGN RATING STATISTICAL ANALYSIS STOCK MARKET TAX TAX REVENUE TAX REVENUES WAGES WORLD DEVELOPMENT INDICATORS Diop, Ndiame Ben Abdallah, Nizar The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
geographic_facet	Middle East and North Africa Tunisia
relation	Policy Research working paper ; no. WPS 5087
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Diop, Ndiame Ben Abdallah, Nizar
author_facet	Diop, Ndiame Ben Abdallah, Nizar
author_sort	Diop, Ndiame
title	The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
title_short	The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
title_full	The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
title_fullStr	The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
title_full_unstemmed	The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia
title_sort	dynamic effects of countercyclical fiscal stimulus on output in tunisia
publishDate	2012
url	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
_version_	1764390722905047040

The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia

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