How Does Public Deficit Affect Public Investment in Senegal?
DOI:
https://doi.org/10.47604/jpid.269Keywords:
nonlinear, public deficit, public investment, debtAbstract
Purpose: This paper proposes an assessment of the non-linear relationship between public deficit and public investment in debt situation.
Methodology: We use an endogenous growth model, with productive public spending, that we test empirically using the interaction model of Brambor et al. (2002), over the period 1980-2015, in Senegal.
Results: The results of the estimates show a change in the regime of the relationship between public investment and public deficit for public debt level equal to 80% of GDP. When public debt is below this threshold, any increase in the deficit has an expansive effect on public infrastructure spending. When public debt is above the threshold of 80% of GDP, an increase in the deficit has a recessive effect on public investment.
Policy recommendation: An important contribution of this study is to show that the PCSCS implemented in the WAEMU zone cannot register only in a nominal sense to inking with the euro. The budgetary rules laid down in the Stability Pact should be studied in depth. The study would benefit from further study. One of the extensions of this study would be to determine the impact of this debt threshold of 80% on long-term economic growth in Senegal.
Downloads
References
Ary Tanimoune, N., Combes, J.-L., and Plane, P. (2005). "Les effets non linéaires de la politique budgétaire : le cas de l’Union Economique et Monétaire Ouest Africaine", Communication aux journées de l’AFSE, Economie du développement et de la transition, Clermont-Ferrand.
Barro, R. J. (1974). "Are government bonds net wealth?" Journal of Political Economy, 82, 6, 1095-1117.
Bertola G. and A. Drazen (1993). "Trigger points and budget cuts: Explaining the Effects of Fiscal Austerity", American Economic Review, vol. 83, pp. 11-26.
Blanchard, O. (1990). "Comment", NBER Macroeconomics Annual, vol. 5, pp. 111-116.
Brambor, Thomas, William Clark, and Matt Golder (2005). "Are African Party Systems Different?", New York University.
Buiter, W. (2001). "A code for fiscal stability", Oxford Economic Papers, vol. 53, pp. 153
Colletaz, G. and C. Hurlin (2006). "Threshold effects of the public capital productivity: an international panel smooth transition approach", Université d’Orléan, LEO wp. No. 1/2006.
Durbin J., G.S. Watson (1951). "Testing for serial correlation in least-squares regression", Biometrica.
Fisher, R.A. (1932). "Statistical Methods for Research Workers ", Oliver and Boyd, Edinburgh.
Giavazzi, F. and M. Pagano (1990). "Can severe fiscal Contractions be expansionary? Tales of Two Small European Countries", NBER Macroeconomic Annual, vol. 5, pp. 75-111.
Hansen, B. (1999). "Threshold effects in non-dynamic panels: Estimation, testing, and inference", Journal of Econometrics, vol. 93, pp. 345-368.
Hansen, B.E. (1996). "Inference when a nuisance parameter is not identified under the null hypothesis ", Econometrica 64, 413-430.
Hausman, J A. (1978). "Specification tests in econometrics", Econometrica, pp.1251-1271.
Kell, M. (2001). "An assessment of fiscal rules in the United Kingdom", IMF Working Paper No. 01/91.
Kellerman, K. (2007). "Debt financing of public investment: on a popular misinterpretation of the golden rule of public finance", European Journal of Political Economy, vol. 23, pp. 1088-1104.
Levin, A., Lin, C.F., and Chu. C.S.J. (2002). "Unit root test in panel data: Asymptotic and finite sample properties", Journal of Econometrics, 108, 1-24.
Minea A. and Villieu P. (2008), "faut-il financer l’investissement public par emprunt ?les enseignements d’un modèle de croissance endogène", Revue économique, 59 (1), janvier, p. 5-32.
Nubupko, K. (2003). "Dépenses publique et croissance des économies de l’UEMOA", CIRAD Monpellier (France).
Musgrave, R. (1939). "The nature of budgetary balance and the case for the capital budget", American Economic Review, vol. 29, pp. 260-271.
Oxley H. and J. Martin (1991). "Controlling government spending and deficits: trends in the 1980s and Prospects for the 1990s”, OECD Economic Studies, vol. 17, pp. 145-189.
Sutherland, A. (1997). "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy? ", Journal of Public Economics, vol. 65, pp. 147-162.
Sarr, F. (2005). "La soutenabilité de la politique budgétaire dans la zone UEMOA : essai d’évaluation théorique et empirique ", Document de travail, Université d’Orléans.
Downloads
Published
How to Cite
Issue
Section
License
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
