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Is Escaping the Fiscal Pro-Cyclicality Trap Possible? Evidence from the Middle East and North Africa

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dc.contributor.authorBogetić, Željko
dc.contributor.authorNaeher, Dominik
dc.date.accessioned2024-10-28T21:09:31Z
dc.date.available2024-10-28T21:09:31Z
dc.date.issued2024-10-28
dc.description.abstractThis paper analyzes fiscal policy cyclicality, with a specific focus on the Middle East and North Africa region, which is known for its significant output volatility. The paper provides new and more granular evidence on the direction, intensity, and specific fiscal sources of cyclicality. Based on annual data covering 184 countries from 2000 to 2022, the findings suggest that there are important differences in the assessment of countercyclical fiscal policy achievements among different fiscal policy variables, across world regions, and also within the Middle East and North Africa region. While the global associations between fiscal cyclicality and income levels have remained relatively stable, countries in the Middle East and North Africa have exhibited diverse performances, some transitioning toward countercyclicality and others moving away from it. The paper also identifies several countries in the Middle East and North Africa that have successfully shifted from procyclical to countercyclical fiscal policy, breaking free from the “fiscal pro-cyclicality trap.” To understand more specific fiscal sources of cyclicality, the paper examines subcomponents of revenues and expenditure. It shows that nontax revenues exhibit a greater degree of procyclicality than tax revenues, and subsidy expenditures tend to be less countercyclical than other fiscal expenditures. This has policy implications and adds a dimension of assessment to subsidies that is not addressed in the literature: subsidies, being less countercyclical than other expenditures in the Middle East and North Africa, do not contribute to macroeconomic stability and long-term growth through this channel, independent of their adverse efficiency, distributional, and fiscal space effects. The paper concludes with a discussion of the implications of these findings, aimed at improving countercyclicality in fiscal policy.en
dc.identifierhttp://documents.worldbank.org/curated/en/099243210282437181/IDU170d79eb315c39148a51975412b664ad95717
dc.identifier.doi10.1596/1813-9450-10959
dc.identifier.urihttps://hdl.handle.net/10986/42316
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10959
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectFISCAL POLICY
dc.subjectBUSINESS CYCLE
dc.subjectPROCYCLICALITY
dc.subjectCOUNTERCYCLICALITY
dc.subjectMENA
dc.titleIs Escaping the Fiscal Pro-Cyclicality Trap Possible? Evidence from the Middle East and North Africaen
dc.typeWorking Paper
dspace.entity.typePublication
okr.associatedcontenthttps://reproducibility.worldbank.org/index.php/catalog/143 Link to data and reproducibility package
okr.crossref.titleIs Escaping the Fiscal Pro-Cyclicality Trap Possible? Evidence from the Middle East and North Africa
okr.date.disclosure2024-10-28
okr.date.doiregistration2025-04-26T02:27:03.451955Z
okr.date.lastmodified2024-10-28T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099243210282437181/IDU170d79eb315c39148a51975412b664ad95717
okr.guid099243210282437181
okr.identifier.docmidIDU-70d79eb3-5c39-48a5-9754-2b664ad95717
okr.identifier.doi10.1596/1813-9450-10959
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10959
okr.identifier.externaldocumentum34412617
okr.identifier.internaldocumentum34412617
okr.identifier.reportWPS10959
okr.import.id5600
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099243210282437181/pdf/IDU170d79eb315c39148a51975412b664ad95717.pdfen
okr.region.geographicalMiddle East
okr.region.geographicalNorth Africa
okr.topicMacroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topicMacroeconomics and Economic Growth::Business Cycles and Stabilization Policies
okr.unitWB Off:Warsaw(Cnt Eur & Baltics) (ECCPL)
okr.unitEFI-MNA-Regional Director (EMNDR)
relation.isAuthorOfPublicationc14617d3-fa61-4780-a0b5-e10a9f51aa9a
relation.isAuthorOfPublication.latestForDiscoveryc14617d3-fa61-4780-a0b5-e10a9f51aa9a
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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