Fiscal Policy and Growth: An Empirical Evaluation in CFA Franc Zone

Abstract

This paper evaluates the link between fiscal policy and growth. For this purpose, the authors evaluated the influence of the level of public expenditures and revenues as well as the composition of the budget on economic growth. Relying on data provided by African Development Indicators, the sample was made up of 9 countries of the CFA Franc Zone over the period of 1990-2010. Focusing on panel data techniques, the analysis led to the following findings: 1. public expenditures significantly reduce growth, 2. an increase in revenues is associated with positive GDP per capita growth even though the relation is not statistically significant, and 3. the composition of the budget matters in relation to economic growth process, especially indirect taxes (which enhance GDP per capita growth) and wages and salaries (which harm growth).