The Impact of Government Spending on Inflation, "An Econometric Study on the North African Countries for the Period: 2000-2016"

Abstract

This paper aimed to study the impact of government expenditure on inflation in the four North African Countries: Algeria, Tunisia, Egypt and Morocco. The study used standard modeling techniques, where the time series data models were applied to an annual time series for government expenditure estimated in real terms and CPI inflation rate during the period (2000- 2016), and the adopted series of data was taken from the WDI Country Database. This study concluded that the government spending has a direct impact on inflation in the countries under study, due to the applied expansionary spending policies which pushed prices higher and fed inflation. This can be explained by the government spending which encouraged demand for consumer goods and services more than demand for productive goods. Furthermore, the results showed that the inflation rate is disparate in the North African Countries during the period of study, where it was more severe in Tunisia and Egypt compared with Algeria and Morocco.