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What Can SVAR Models Tell us About the Impact of Public Expenditure Shocks on Macroeconomic Variables in Algeria? A Slight Hint to the COVID-19 Pandemic

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  • Fatih Chellai

    (Lecturer A, Department of Based Education, Ferhat Abbas University, Sétif, Algeria)

Abstract

Research background: Public spending is a generator of economic growth as well as its components; this reality is more depicted in the era of the COVID-19 world pandemic where a recession in economic activities has touched all countries. Purpose: In this paper, we tried to study the impact of shocks in public expenditure on some macroeconomic variables in Algeria during the period (1970–2019). Research methodology: The VAR Structural models were used to study the response of these variables to shocks in public spending in Algeria. Results: The results of the modeling indicate a direct response of both exports and imports to a shock in the levels of public expenditure, but this response is relatively weak to the variable value of exports (especially in the short term), which is mainly due to the structure of the Algerian economy that is mainly dependent on the export of oil and gas, which in turn is mainly affected by international energy factors e.g. prices, supply, and demand. For the rate of inflation, there was an inverse response to shocks in the level of public spending. In the context of the global health and economic crisis, we will witness a further faltering of economic growth in Algeria. Novelty: Our contribution is a new feature of the application of the SVAR model in the era of the COVID-19 pandemic that focused on analyzing the impacts of public expenditure on exports and imports

Suggested Citation

  • Fatih Chellai, 2021. "What Can SVAR Models Tell us About the Impact of Public Expenditure Shocks on Macroeconomic Variables in Algeria? A Slight Hint to the COVID-19 Pandemic," Folia Oeconomica Stetinensia, Sciendo, vol. 21(2), pages 21-37, December.
    • Handle: RePEc:vrs:foeste:v:21:y:2021:i:2:p:21-37:n:1
    DOI: 10.2478/foli-2021-0014
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    More about this item

    Keywords

    Public Expenditure; SVAR; COVID-19; Algeria;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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