What strategy applied to correct the budget deficit in Tunisia? The threshold effect model

Abstract

Macroeconomic policies in Tunisia are characterized by a set of deficiencies. They illustrate their weakness in achieving an economic balance following the 2011 revolution and the covid-19 health problem. Indeed, the economy announces financial insufficiencies compared to several countries, such as Morocco. Fiscal policy is being called into question to create the conditions for stable and efficient economic growth.

Indeed, fiscal and monetary policy constantly monitors aggregate demand. The latter makes it possible to increase the general level of prices and also a weak aggregate demand makes it possible to reflect an economic recession. We must act on aggregate demand in order to achieve stable economic growth.

Fiscal policy acts between government spending and resources. And, monetary policy controls the supply of money by choosing a suitable interest rate that it encourages investors to invest within the country.

The objective of this work is to present the conditions for a remarkable increase in public spending in Tunisia. The objectives of fiscal policy are to identify the causes in order to achieve a good balance and to draw inspiration from theoretical and empirical work for a change of state and to have economic mutations.

Indeed, recent econometric methods in non-linear time series can be implemented to explain this economic phenomenon: the threshold effect model. The latter is represented by different linear dynamics depending about the country.

JEL Classification: H62, C51.

Article type: Empirical research.