Natural Resources and Fiscal Policy in CEMAC: The Role of Institutional Quality

Abstract

This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC). The methodology adopted for this purpose is based on panel data (over the 1996-2016 period) and the GMM system estimator. The results show that natural resource rents are a means by which institutional quality affects the orientation of fiscal policy. Indeed, economic and institutional governance complements natural resource rents in the countercyclical orientation of total public spending. Thus, there is an absence of the indirect effects of institutional quality on the orientation of total public revenue behavior. Similarly, during natural resource booms, the orientation of total public spending remains countercyclical. Thus, political and institutional governance reinforces the effects of natural resource booms on the countercyclical orientation of total public spending. With regard to the decline in natural resource rents, total public spending remains countercyclical. Only institutional governance reinforces the effects of the decline in natural resource rents on the countercyclical nature of total public spending. Thus, the procyclical orientation of the behavior of total public revenue remains, regardless of whether there are periods of boom or collapse in natural resource rents. Political governance amplifies the effects of the decline in natural resource rents on the procyclical behavior of total public revenue. These results lead to economic policy implications.

Good governance and poverty alleviation in the cemac sub-region: A fixed effect model with driscoll-kraay standard errors technique

“…Good governance is essential in driving out poverty and increasing the livelihood of the population. However, the performance of governance quality in the CEMAC member countries are far fetch (Bouanza & Ngassa, 2021). Indicators of governance have also performed poorly in these countries compared to their counterparts (Kaufmann, Kraay, & Mastruzzi, 2010).…”