Abstract
Since 2011, Tunisia experienced a democratic transition, which upset the economic recovery. So, the main aim of this paper is to assess the sustainability of fiscal policy, considering Tunisia’s main macroeconomic variables. To this end, we applied two studies to analyze this policy over the period from 1970 to 2015. First, in the former study, sustainability was examined by a stationarity and cointegration econometric approach. Then the second study is based on an accounting approach in terms of threshold. The first study showed the non-sustainability of the public debt. This result was confirmed by the second approach. This study showed that the stimulus policy, “go and stop” undertaken by the transition government explains mostly the deterioration of the public debt and the deterioration of the main economic indicators.
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Notes
If there is a region having experienced several periods of financial crisis in the world, it is the Latin America region. But despite this, most of these countries in this area could improve their economic situation, as was the case of Argentina, Brazil, and Mexico.
The “Polity score,” captures this regime authority spectrum on a 21-point scale ranging from − 10 (hereditary monarchy) to + 10 (consolidated democracy). The Polity scores can also be converted into regime categories in a suggested three-part categorization of “autocracies” (− 10 to − 6), “anocracies” (− 5 to + 5 and three special values − 66, − 77, and − 88), and “democracies” (+ 6 to + 10).
The NPG constraint, also known in the literature as the transversality condition, states that the present value of government debt in the indefinite future converges to zero. The government cannot finance interest payments on debt by continuously issuing new debt.
The transition variable is coded according to the following scale:
[+ 3] Major democratic transition—6 points or greater increase in Polity score over a period of 3 years or less including a shift from an autocratic Polity value (− 10 to 0) to a partial democratic Polity value (+ 1 to + 6) or full democratic Polity value (+ 7 to + 10) or a shift from a partial democratic value to a full democratic value.
[+ 2] Minor democratic transition—3- to 5-point increase in Polity score over a period of 3 years or less including a shift from autocratic to partial democratic or from partial to full democratic value (see definitions above).
[+ 1] Positive regime change—3- or more-point increase in POLITY score without a shift in regime type as defined above.
[0] Little or no change in Polity score.
To improve our figure, we rescale regtrans which will take values from 0 to 4.
“Budgetary deficit” is a dummy variable which represents the threshold. Based on our calculation in Table 4, it takes 0 for negative values and 1 otherwise
Abbreviations
- MSEA:
-
Modeling and statistical and economic analysis
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Gouasmi, Z., Haffoudhi, H. Analysis of Sustainability of Fiscal Policy and Democratic Transition: Case of Tunisia. J Knowl Econ 11, 512–529 (2020). https://doi.org/10.1007/s13132-018-0558-5
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DOI: https://doi.org/10.1007/s13132-018-0558-5