The dynamic effects of fiscal policy and fiscal multipliers in Tunisia

ABSTRACT

This study analyses the macroeconomic effects of fiscal policy by estimating fiscal multipliers for Tunisia. The study is based on the Structural Vector Autoregression (SVAR) model and uses quarterly data from 2000Q1 to 2019Q4. Five main insights can be drawn from these results. First, fiscal multipliers are moderate, as suggested by earlier studies. Second, spending multipliers generated by total and consumption expenditures, respectively, are small, implying that government spending generates substantial crowding out effects. Third, investment multipliers are larger than consumption multipliers. Fourth, fiscal multipliers have declined in the post-2011 revolution period, suggesting that spending multipliers are lower during times of recession. Fifth, domestic supply shocks could shape the effects of fiscal policy and cause spending multipliers to fall.

KEYWORDS:

• Fiscal multiplier
• SAVR model
• local projection method
• fiscal shocks
• Tunisia

JEL CLASSIFICATION:

• B22
• E62
• C22

Acknowledgments

The researchers extend their thanks and gratitude to the Deanship of Graduate Studies and Scientific Research at Dar Al Uloom University for their support and funding of this study.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Please refer to Appendix A for further details.