The Effects of Fiscal Policy in Great Recession by using Panel Smooth Transition Regression (PSTR): Evidence from Emerging Market
International Journal of Business and Economics Research
Volume 3, Issue 2, April 2014, Pages: 99-107
Received: Apr. 6, 2014; Accepted: Apr. 22, 2014; Published: Apr. 30, 2014
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Authors
Amira Majoul, Applied Quantitative Analysis, Unit (UAQUAP), Tunisia ISG and GATE (UMR 5824 CNRS)
Olfa Manai Daboussi, Higher Institute of Management of Tunis, University of Tunis, Tunisia
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Abstract
This article examines the effect of fiscal policy on economic growth in emerging countries during periods of economic instability. This work aimed to determine whether emerging countries are able to adopt countercyclical fiscal policies to mitigate the impact from outside. Our study used a new approach developed by González and al. (2005), the (PSTR) model. This model has been studied in 23 emerging countries grouped into four regions: Latin America, Emerging Europe, Asia and Africa and covers the period 1990-2012. Our research will focus on the effect of fiscal policy in emerging countries on their economic growth during periods of instability. This model confirmed the non-linear relationship between fiscal policy and activity in these countries. Indeed, it can highlight the asymmetric effect of fiscal policy on activity distinguishing between two regimes. Our results show that in an unsustainable fiscal situation, the pro-cyclical fiscal policy is a solution to avoid the higher cost of debt and during the crisis a strong fiscal position is fundamental to ensuring macroeconomic stability.
Keywords
Great Recession, Fiscal Policy, Smooth Transition Models, Emerging Markets
To cite this article
Amira Majoul, Olfa Manai Daboussi, The Effects of Fiscal Policy in Great Recession by using Panel Smooth Transition Regression (PSTR): Evidence from Emerging Market, International Journal of Business and Economics Research. Vol. 3, No. 2, 2014, pp. 99-107. doi: 10.11648/j.ijber.20140302.17
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