Essays on Fiscal Policy

Abstract

This dissertation examines how the effects of fiscal shocks vary across countries and economic conditions. The three essays analyze fiscal policy transmission in developing, resource-dependent, and advanced economies. The first chapter focuses on the time-varying effects of government expenditure shocks in six WAEMU countries using a Bayesian TVP-SVAR model with stochastic volatility. The findings show that government spending generally supports output, but the strength and persistence of this effect differ across countries. This indicates that even within a monetary union, fiscal policy effectiveness depends importantly on country-specific structural conditions, making fiscal design especially important where monetary autonomy is limited. The second chapter investigates the effects of oil revenue shocks in four African oilexporting economies using a hierarchical Bayesian panel VAR and country-specific structural VAR models. The findings show that oil revenue windfalls generate short run gains in government expenditure and output, but these effects fade within a few years and are accompanied by inflationary pressures and real exchange rate appreciation. This indicates that oil-driven fiscal expansions provide only temporary macroeconomic support and underscores the importance of institutions that smooth revenue volatility and strengthen resilience to external shocks. The third chapter studies whether the effects of government spending shocks on business investment depend on macroeconomic uncertainty in seven OECD countries using a threshold panel VAR. The results suggest that fiscal expansions crowd out business investment in low-uncertainty periods but have a more muted effect when uncertainty is high, indicating that private sector responses to fiscal policy may be state-dependent. More broadly, the findings are consistent with the view that the investment effects of fiscal policy depend not only on the policy shock itself, but also on the prevailing economic environment. Overall, this thesis shows that the effectiveness of fiscal policy cannot be reduced to a single multiplier or uniform transmission mechanism. Instead, the fiscal multiplier varies with structural characteristics and prevailing economic conditions. Taken together, the three essays provide evidence that institutional arrangements, resource dependence, and economic uncertainty influence the transmission of fiscal policy. Collectively, the findings suggest that the effects of fiscal policy are state-dependent, underscoring the importance of accounting for economic and institutional conditions when designing fiscal interventions rather than relying on uniform policy prescriptions.