Exiting from Fragility in Sub-Saharan Africa: The Role of Fiscal Policies and Fiscal Institutions

IMF Working Paper 15/268

46 Pages Posted: 18 Jan 2016

See all articles by Corinne Deléchat

Corinne Deléchat

International Monetary Fund (IMF)

Gustavo Ramirez

International Monetary Fund (IMF)

Ejona Fuli

International Monetary Fund (IMF)

Dafina Mulaj

International Monetary Fund (IMF)

Rui Xu

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: December 15, 2015

Abstract

This paper studies the role of fiscal policies and institutions in building resilience in sub-Saharan African countries during 1990-2013, with specific emphasis on a group of twenty-six countries that were deemed fragile in the 1990s. As the drivers of fragility and resilience are closely intertwined, we use GMM estimation as well as a probabilistic framework to address endogeneity and reverse causality. We find that fiscal institutions and fiscal space, namely the capacity to raise tax revenue and contain current spending, as well as lower military spending and, to some extent, higher social expenditure, are significantly and fairly robustly associated with building resilience. Similar conclusions arise from a study of the progression of a group of seven out of the twenty-six sub-Saharan African countries that managed to build resilience after years of civil unrest and/or violent conflict. These findings suggest relatively high returns to focusing on building sound fiscal institutions in fragile states. The international community can help this process through policy advice, technical assistance, and training on tax administration and budget reforms.

Keywords: fragility, resilience, fiscal policy, fiscal institutions, CPIA, sub-Saharan Africa

JEL Classification: 011, 019, 023, 043, 055

Suggested Citation

Deléchat, Corinne and Ramirez, Gustavo and Fuli, Ejona and Mulaj, Dafina and Xu, Rui, Exiting from Fragility in Sub-Saharan Africa: The Role of Fiscal Policies and Fiscal Institutions (December 15, 2015). IMF Working Paper 15/268, Available at SSRN: https://ssrn.com/abstract=2716248 or http://dx.doi.org/10.2139/ssrn.2716248

Corinne Deléchat (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Gustavo Ramirez

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ejona Fuli

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dafina Mulaj

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rui Xu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://https://sites.google.com/site/ruixuwebsite/

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