Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria

23 Pages Posted: 27 Dec 2007

See all articles by Boileau Loko

Boileau Loko

International Monetary Fund (IMF)

Kangni Kpodar

International Monetary Fund (IMF)

Oumar Diallo

United Nations

Date Written: December 2007

Abstract

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure - mostly non-tradable goods - thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.

Keywords: Government expenditures, Algeria, Oil, Real effective exchange rates

Suggested Citation

Loko, Boileau and Kpodar, Kangni and Diallo, Oumar, Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria (December 2007). IMF Working Papers, Vol. , pp. 1-21, 2007. Available at SSRN: https://ssrn.com/abstract=1078791

Boileau Loko (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kangni Kpodar

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Oumar Diallo

United Nations ( email )

New York, NY 10017
United States

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