Assessing fiscal sustainability based on fiscal reaction function : case study Algeria

Abstract EN

This study examines the sustainability of fiscal policy in Algeria by exploring government's reaction to rising public debt accumulation via the estimation of a fiscal reaction function over the period 1980-2017 using The Autoregressive Distributed Lag Model (ARDL.

Our findings suggest that government's fiscal behaviour is consistent with the intertemporal budget constraint, but the fiscal adjustment in primary balance debt appears to be very low Compared to the increase in public.

In particular, evidence of significant fiscal pressures in recent years persists, largely driven by excesses in public expenditure.

To ensure long term fiscal sustainability, the study supports that government should improve on her tax revenue generation and other source of income and ensure records of surplus budgeting.