Macroeconomic effects of fiscal policy shocks: panel VAR evidence from MENA countries

ABSTRACT

This study examines discretionary fiscal policy effects on output by employing a Panel VAR model in MENA countries during 1990–2018. the results demonstrate fiscal multipliers are larger when public debt is low, at a high institutional quality, and during recession periods. Contrary to empirical studies, we found the response of output to fiscal shocks is larger at a low level of financial development. Our findings have significant policy implications focusing on fiscal policy mix in downturns of an economy, lower levels of public debt, lower levels of financial development, and a higher level of institutional quality.

KEYWORDS:

• Fiscal multipliers
• panel vector autoregression (VAR)
• Middle East and North Africa (MENA) countries
• fiscal policy shocks

JEL classification:

• C33
• E62
• H30
• H50
• O23

Disclosure statement

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

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Additional information

Notes on contributors

Somayeh Sedighi

Somayeh Sedighi, Ph.D. student in the Doctoral School of Economics at Faculty of Economics and Business Administration, University of Szeged, Hungary. Her research focuses on the political economy of development, with the emphasis on natural resources, foreign aid and remittances.

Samaneh Raiss Shaghaghi

Samaneh R. Shaghaghi, Ph.D. student in the Doctoral School of Economics at Faculty of Economics and Business Administration, University of Szeged, Hungary. Her primary research interest is in China’s Economics and Politics.

Gabriel Temesgen Woldu

Gabriel Temesgen Woldu, Ph.D. student in the Doctoral School of Economics at Faculty of Economics and Business Administration, University of Szeged, Hungary. His research interest is inclined towards development macroeconomics, environmental economics and financial econometrics.