Commodity Price Fluctuation and Fiscal Management in Sub-Saharan Africa
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Sochi State University, Rusia
Fiscal policy in resource-rich countries should be consistent with achieving macroeconomic objectives such as macroeconomic stability and an efficient allocation of resources especially when its role in injecting share of resource rent into the domestic economy is considered in Africa. However, reliance on revenue from commodity exports renders fiscal management, budgetary planning, and efficient use of public resources demanding. This study thus investigates linkages between commodity prices and fiscal operations among a sample of commodity exporters in SSA. Using data for 1992 to 2017 for nine resource-rich countries in SSA region, panel co-integration and fully modified OLS (FMOLS) technique to determine long run relationship effects. The study finds that elasticity of fiscal policy measures with respect to output gap was significant and positive suggesting that fiscal policy is actually procyclical among our sample of SSA countries. Moreover, it is found that fiscal policy has not performed well in delivering macroeconomic stabilization. The difficulty in applying fiscal stabilization measures is attributable to unstable revenue inflow due to the extremely volatile environment of commodity prices in the global market. Our policy advice is that governments in commodity-exporting SSA countries should track fiscal strategies aimed at breaking procyclical response of expenditure to macroeconomic cycles.
commodity prices, fiscal shocks, fluctuations, procyclical fiscal policy
Adegboye A.C. & Oseni, M. (2021). Fiscal management and commodity price fluctuation in sub-Sahara Africa. Sochi Journal of Economy, 15(2), 104-117