Procyclicality, Fiscal Dominance, and the Effectiveness of Fiscal Policy in Egypt

18 Pages Posted: 14 Feb 2012

See all articles by Mohamed Hassan

Mohamed Hassan

Arab Republic of Egypt - Central Bank of Egypt

Date Written: March 29, 2007

Abstract

This paper uses Structural Vector Autoregressive (SVAR) models to study the effectiveness of fiscal policy in stabilizing the real GDP. To do so, it first addresses the cyclicality of fiscal policy in Egypt since the early 1980s. Then, it tackles the fiscal dominance. Once the stage is prepared, it moves on to investigate the effectiveness of the fiscal policy. The paper concludes that the relationship between the fiscal policy and the economic activity is very week and it goes from the former to the later while the relationship between the fiscal policy and the monetary policy is strong and it also goes from the former to the later. This aggravated the economic instability and made the economy more prone to a boom-bust cycle

Keywords: Procyclicality, Fiscal dominance, SVAR

JEL Classification: C32, E62, E63

Suggested Citation

Hassan, Mohamed, Procyclicality, Fiscal Dominance, and the Effectiveness of Fiscal Policy in Egypt (March 29, 2007). Available at SSRN: https://ssrn.com/abstract=2004268 or http://dx.doi.org/10.2139/ssrn.2004268

Mohamed Hassan (Contact Author)

Arab Republic of Egypt - Central Bank of Egypt ( email )

Egypt

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