Why Fiscal Policies are Pro-cyclical in Economic and Monetary Community of Central Africa?

The objective of this paper is to study empirically the cyclical behaviour of fiscal policies in CEMAC. According to the literature, fiscal policies are pro-cyclical in developing countries. Two main arguments are put forward: borrowing constraints during economic downturns; and irrational behaviour of governments, which do not save enough during booms because of political pressure groups. Over the period 1992 to 2012, using ordinary least and double least squares on panel data, our estimates show that fiscal policies are pro-cyclical in CEMAC and public investment spending is the most pro-cyclical. This is because their governments do not save enough when the terms of trade are favourable (boom periods), due to the fact that they rather take advantage of their access to external finance to increase public investment spending necessary for their development (rational behaviour).