Middle East and Central Asia > Algeria

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Maria Elkhdari, Moez Souissi, and Mr. Andrew Jewell
At a time when Algeria must undertake considerable fiscal consolidation to restore sustainability, the issue of fiscal multipliers has come to the fore. This paper estimates short-term and long-term fiscal multipliers for Algeria applying several econometric methodologies, including Local Projection Methodology and Vector Autoregressive Models, and using both Algeria-specific and panel data. The paper also explores asymmetries related to the sign of the output gap as well as the direction of spending. The results suggest that (i) average fiscal multipliers for Algeria are generally moderate and below unity; (ii) the impact of public spending shocks is more important when the output gap is negative; (iii) fiscal spending multipliers are significantly larger during spending contraction than expansion; (iv) procyclicality in public spending does not appear to affect output, except for capital spending cuts when the output gap is negative; and (v) while multipliers associated with countercyclical public spending can be sizeable, a contraction in current spending does not materially affect non-oil GDP.
Reda Cherif, Fuad Hasanov, and Min Zhu


The “Gulf Falcons”—the countries of the Gulf Cooperation Council—have high living standards as a result of large income flows from oil. The decline of oil prices between summer 2014 and fall 2015 underscores the urgency for the Gulf Falcons to diversify away from their current heavy reliance on oil exports. This book discusses attempts at diversification in the Middle East and North Africa and the complex choices policymakers face. It brings together the views of academics and policymakers to offer practical advice for future efforts to increase productivity growth.

International Monetary Fund. Middle East and Central Asia Dept.
This paper studies the main sources for growth in Algeria within a cross-country analysis and draws policy recommendations to support faster growth. In Section 1, a growth accounting exercise framework has been explained, and in Section 2, the determinants for growth are identified. This study examines the factors behind the recent increase in inflation and the policies that should be implemented to bring inflation back to the level targeted by the monetary authorities. Two approaches used to explore the determinants of inflation were discussed.
Mr. Paul Cashin, Mr. Kamiar Mohaddes, and Mr. Mehdi Raissi
This paper analyzes spillovers from macroeconomic shocks in systemic economies (China, the Euro Area, and the United States) to the Middle East and North Africa (MENA) region as well as outward spillovers from a GDP shock in the Gulf Cooperation Council (GCC) countries and MENA oil exporters to the rest of the world. This analysis is based on a Global Vector Autoregression (GVAR) model, estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Spillovers are transmitted across economies via trade, financial, and commodity price linkages. The results show that the MENA countries are more sensitive to developments in China than to shocks in the Euro Area or the United States, in line with the direction of evolving trade patterns and the emergence of China as a key driver of the global economy. Outward spillovers from the GCC region and MENA oil exporters are likely to be stronger in their immediate geographical proximity, but also have global implications.
Ms. Rina Bhattacharya and Hirut Wolde
In this paper we contribute to the empirical literature on growth in the MENA region by attempting to quantify the impact of the various constraints faced by local businesses highlighted by the World Bank’s Business Enterprise surveys. To the best of our knowledge this dataset has not been used in any empirical analysis looking at the main constraints on growth in the MENA region. Our empirical results suggest that the key direct constraints to growth in the MENA region are difficulties in access to finance, labor skill mismatches and shortages, and electricity constraints.
Mr. Boileau Loko and Mame Astou Diouf
This paper studies the main determinants of total factor productivity (TFP) growth using principal component analysis and a dynamic panel data model and, through a case study, explores key areas where accelerated reforms in the Maghreb countries would boost TFP gains. The results reveal that reforms targeted at attracting foreign direct investment and rationalizing government size, shifting resources from low-productivity sectors to higher ones, and encouraging women to enter the work force, could accelerate TFP gains. Equally important are reforms aimed at strengthening human capital, increasing the volume of trade, and improving the business environment.
International Monetary Fund
This Selected Issues paper for Algeria analyzes the growth prospects of the Algerian economy. Drawing on the findings of the empirical growth literature, the paper combines growth accounting and cross-country growth regressions to examine the role of macroeconomic and institutional factors in driving economic growth. It reviews the past growth performance in Algeria and explores the reasons underpinning the recent pickup in nonhydrocarbon GDP growth. The paper also analyzes labor market developments and assesses the factors that may hinder employment creation in Algeria.
Ms. Dalia S Hakura
This paper analyzes the weak growth performance in the Middle East and North Africa (MENA) region during 1980-2000 using an empirical model of long-run growth. The relative importance of the factors affecting growth is shown to vary across 16 MENA countries. In GCC countries, where oil revenues are significant, large governments appear to have been a key factor stifling private-sector growth and impeding diversification. In other MENA countries poor institutional quality has held back growth. Political instability is also shown to have played a role. While the MENA region's growth differential with east Asia is explained well in the 1980s, this is less so in the 1990s.
Amer Bisat, Mr. Mohamed A. El-Erian, Mr. Mahmoud El-Gamal, and Mr. Francesco P Mongelli
The paper considers investment and growth in the Middle East and North Africa (MENA) region. Notwithstanding cross-country differences, investment as a whole has been too low, too heavily tilted toward the public sector, too highly dependent on external influences, and less productive than in many other regions. Improving the region’s investment performance is critical if policymakers are to succeed in increasing the region’s economic growth rate. After discussing the relationship between investment and growth, the paper analyzes the investment responsiveness of various countries in the region and notes the policy priorities for strengthening the basis for rapid and sustained economic growth.