Open AccessDeterminants of fiscal effort in sub-Saharan African countries: Does conflict matter?
Author(s) -
Princewill Okwoche,
Chimere Iheonu
Publication year - 2021
Publication title -
economics and business review/the poznań university of economics review
Language(s) - English
Resource type - Journals
eISSN - 2392-1641
pISSN - 1643-5877
DOI - 10.18559/ebr.2021.2.5
Subject(s) - endogeneity , economics , instrumental variable , fiscal policy , debt , generalized method of moments , ordinary least squares , panel data , econometrics , econometric model , control function , variety (cybernetics) , macroeconomics , control (management) , management , artificial intelligence , computer science
This study investigates the determinants of fiscal effort in sub-Saharan African (SSA) within the framework of fiscal reaction functions. Whereas previous studies focusing on SSA have mainly considered the economic non-debt determinants this study accounts for the role of conflict given its persistence in many SSA countries. It employs a variety of panel econometric methods that are applicable in tackling the problem of endogeneity. Specifically the study employs the instrumental variables fixed effects, the two-step generalised method of moments (GMM) and the traditional two-stage least squares techniques. Mainly the evidence shows that although SSA governments have made fiscal adjustments in response to the escalating levels of debt, conflict impacts negatively on this response in SSA. Furthermore, the results affirm the presence of fiscal fatigue in SSA’s fiscal reaction function. Recommendations based on these findings are discussed.