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Buoyant Capital Spending and Worries over Real Appreciation: Cold Facts from Algeria
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Author/Editor: |
Loko, Boileau | Kpodar, Kangni | Diallo, Oumar |
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December 1, 2007 |
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Electronic Access: |
Free Full Text (PDF file size is 370KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure-mostly nontradable goods-thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.
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Series: |
Working Paper No. 07/286 |
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Subject(s): |
Government expenditures | Algeria | Oil | Real effective exchange rates |
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Author's keyword(s): |
Government capital expenditure | real exchange rate | oil |
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Published: |
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December 1, 2007 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2007286 |
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Pages: |
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21 |
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Price: |
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US$18.00
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