Buoyant Capital Spending and Worries over Real Appreciation Cold Facts from Algeria |
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Author:
| Diallo, Oumar Loko, Boileau Kpodar, Kangni |
Series title: | IMF Working Papers |
ISBN: | 978-1-4519-1302-6 |
Publication Date: | Dec 2007 |
Publisher: | International Monetary Fund
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Book Format: | Ebook |
List Price: | Contact Supplier contact
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Book Description:
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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...
More DescriptionThe 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.