Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought

IMF Working Papers, June 13, 2018

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Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought

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Bibliographic details

• Authors: Armand P Fouejieu, Sergio L. Rodriguez, Sohaib Shahid
• Published: June 13, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484361573.001

Summary findings

• The paper estimates fiscal multipliers for the Gulf Cooperation Council (GCC) countries.
• Results indicate that GCC fiscal multipliers have declined in recent years, which would make the on-going fiscal consolidation less costly than previously thought.
• Both capital and current multipliers have declined in recent years.
• Capital multipliers are larger than current multipliers, implying that reducing (less productive) current spending will help limit the adverse impact of such measures on growth.

Methodology

• Estimation approach: OLS panel fixed effects.
• Sample: six countries.
• Sample period: 1990-2016.

Policy implications and recommendations

• Fiscal consolidation in the GCC is likely to be less costly for growth than previously estimated, given the decline in fiscal multipliers.
• Prioritize reductions in current spending (characterized as less productive) over capital spending to limit adverse growth impacts, since capital multipliers remain larger than current multipliers.

Content in this bundle

• Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought, WP/18/133, June 2018
  • Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought, WP/18/133, June 2018 (Markdown version)
  • Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought, WP/18/133, June 2018 (PDF)