The African Department
Cyclical Behavior of Fiscal Policy among Sub-Saharan African Countries
Tetsuya Konuki and Mauricio Villafuerte
Copyright © 2016
International Monetary Fund
Cataloging-in-Publication Data Joint Bank-Fund Library
Names: Konuki, Tetsuya. | Villafuerte, Mauricio. | International Monetary Fund. | International Monetary Fund. African Department.
Title: Cyclical behavior of fiscal policy among Sub-Saharan African countries / Tetsuya Konuki and Mauricio Villafuerte.
Description: Washington, D.C.: International Monetary Fund, 2016. | At head of title: The African Department. | Includes bibliographical references.
Identifiers: ISBN 978-1-51356-354-1 (paper)
Subjects: LCSH: Fiscal policy— Africa, Sub-Saharan. | Business cycles— Africa, Sub-Saharan.
Classification: LCC HJ192.5.K65 2016
The African Department Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF Executive Board.
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Table 7. Cross-country GMM to Identify Determinants of Degree of Procyclicality (Dependent Variable: Degree of Fiscal Cyclicality Measured As The Sensitivity of Cyclically Adjusted Primary Balance to Output Gap)
The authors gratefully acknowledge helpful comments by Guillermo Vuletin and seminar participants at the International Monetary Fund, and excellent research assistant work by Marwa Ibrahim and Yanmin Ye.
Excessively procyclical fiscal policy can be harmful. This paper investigates to what extent the fiscal policies of sub-Saharan African countries were procyclical in recent years and the reasons for the degree of fiscal procyclicality among these countries. It finds that a tendency for procyclical fiscal policy was particularly pronounced among oil exporters and after the global financial crisis. It also finds a statistically significant causal link running from deeper financial markets and higher reserves coverage to lower fiscal policy procyclicality. Fiscal rules supported by strong political commitment and institutions seem to be key to facilitating progress for deeper financial markets and stronger reserves coverage.