Abstract

This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC). The methodology adopted for this purpose is based on panel data (over the 1996-2016 period) and the GMM system estimator. The results show that natural resource rents are a means by which institutional quality affects the orientation of fiscal policy. Indeed, economic and institutional governance complements natural resource rents in the countercyclical orientation of total public spending. Thus, there is an absence of the indirect effects of institutional quality on the orientation of total public revenue behavior. Similarly, during natural resource booms, the orientation of total public spending remains countercyclical. Thus, political and institutional governance reinforces the effects of natural resource booms on the countercyclical orientation of total public spending. With regard to the decline in natural resource rents, total public spending remains countercyclical. Only institutional governance reinforces the effects of the decline in natural resource rents on the countercyclical nature of total public spending. Thus, the procyclical orientation of the behavior of total public revenue remains, regardless of whether there are periods of boom or collapse in natural resource rents. Political governance amplifies the effects of the decline in natural resource rents on the procyclical behavior of total public revenue. These results lead to economic policy implications.

Highlights

  • This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC)

  • The methodology adopted for this purpose is based on panel data and the generalized method of moments (GMM) system estimator

  • This main lesson can be divided into two. a) Regarding political, economic and institutional governance, these factors, which have complementary effects on natural resource rents, play a role in the countercyclical orientation of total public spending. b) Regarding political governance, which is a factor with complementary effects on the decline in natural resource rents, plays a role in the procyclical orientation of total public revenue. a) Political, economic and institutional governance: factors that have complementary effects on natural resource rents and that play a role in the countercyclical orientation of total public spending Dependence on natural resources conditions a countercyclical orientation of total public spending in CEMAC

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Summary

Introduction

C. Ngassa increasing fiscal uncertainty and encouraging suboptimal fiscal policy (Spatafora and Samake, 2012). Countries that are highly dependent on natural resources, such as CEMAC countries, are vulnerable to major and persistent shocks due to the volatility of commodity prices. Combined with weak institutions, these countries tend to pursue procyclical fiscal policies

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