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Fiscal Policy, Institutional Quality, and Economic Growth in West African Countries

Ernest Simeon Odior, PhD, Saheed Atanda, Owoh Fidelis Chukwura

Abstract

This research paper will aim at investigating the interactions between fiscal policies, institutional quality and macroeconomic growth performance in West African countries for the period 2000- 2024. This paper will employ the two-step system GMM estimation technique in handling issues concerning growth persistency, individual heterogeneity, simultaneity and endogeneity in the case of institutional, fiscal policy and growth relationship. Fiscal policies seem to affect growth in an asymmetric way as it is clear that fiscal policies which promote productivity and revenue collection improve growth performances when institutions are strong, but high public debts and poor management of public expenditures harm growth. However, institution quality plays a significant role in promoting growth performance and enhancing fiscal policies effects. This research concludes that West African countries need much more than fiscal stimulus packages; what they need is credible fiscal management institutionalization aimed at improving efficiency in public investment, revenue collection and minimizing public expenditure losses. This research paper makes an important contribution to literature on fiscal policies-growth relationships in that institutional quality seems to play a key role in promoting growth through fiscal policies in West Africa.

Keywords

Fiscal PolicyInstitutional QualityEconomic GrowthWest AfricaSystem GMM. JEL Classification: E62; O43; C33; H50; H60 JBAE

References

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