Abstract
The taxonomy established by Wagner and Keynes on the effect of government expenditure on economic growth has continued to generate a series of empirical studies but so far no consensus has been achieved on the exact nexus between deficit financing and economic growth and when interacting with inflation variable. The study contributed to this debate by using the disaggregated Vector Autoregression (VAR) approach to investigate the impact of deficit financing on economic growth with inflation as an interaction variable. The study found, amongst others, that overall deficit financing had a positive and significant impact on economic growth when financed through external sources but had a deleterious effect when financed through domestic sources. This could be attributed to the crowding-out effect of the private sector when deficit financing is funded through the domestic loan market. The study also found that overall deficit financing is inflationary which also resulted in to decrease in real interest rates.
Highlights
Economic growth appears to be an essential element in order to accelerate the process of economic development
What spinoffs can West African Economic and Monetary Union (WAEMU) member countries expect from effective management of fiscal policy instruments? In other words, can an effective fiscal policy sustainably raise the growth rate of an economy?
We have investigated the relationship between economic growth and some fiscal policy instruments
Summary
Economic growth appears to be an essential element in order to accelerate the process of economic development. The effects of fiscal policy are still debated in the economic literature. The 2009 directives are the second generation of directives forming the harmonized framework for public finances within WAEMU. What spinoffs can WAEMU member countries expect from effective management of fiscal policy instruments? Can an effective fiscal policy sustainably raise the growth rate of an economy?. This article, far from being a study of the determinants of economic growth in WAEMU, is intended to be a modest contribution to understanding the link between fiscal policy instruments and economic growth. A second section (2) will relate to the analysis of the effects of fiscal policy instruments on economic growth. A fourth section (4) will be reserved for the conclusion and the implications of economic policy
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International Journal of Economics and Financial Research
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
