The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.