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The Dynamic Effects of Countercyclical Fiscal Stimulus on Output in Tunisia

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
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Middle East and North Africa | Tunisia
2012-03-19T19:13:10Z | 2012-03-19T19:13:10Z | 2009-10-01

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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