Abstract
The objective of this study was to examine the budget deficit impact on economic growth in Tunisia over the period 1970-2018. We proposed a theoretical model highlighting linear and non-linear effects of the budget deficit on economic growth. Using the Autoregressive Distributed Lag model, this research work draws a long-run balance between budget deficit and economic growth. In addition, we used the Threshold Regression model to detect the threshold variation at which the budget deficit has a negative impact on economic growth. The results show that the budget deficit has a negative and significant effect on this growth over the short-run rather than the long one. Our estimations, therefore, support the existence of a non-linear relationship between budget deficit and economic growth. We found that, starting from a threshold variation equal to 1.126%, the budget deficit negatively affects the Tunisian economic growth.
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