STABILIZATION FUND AND FISCAL POLICY : EVIDENCE FROM ALGERIA

Abstract

The aim of this paper is to examine if the presence of stabilization funds helps Algeria –as an oil rich economy- to stabilize their expenditures and address the pro-cyclical behaviour of fiscal policy, using Autoregressive Distributed Lag (ARDL) model for the period 1984-2016. Alike other oil countries, government spending in Algeria is considered to be strongly pro-cyclical .The results show that the establishment of stabilization fund in Algeria has not contributed to reduce the government spending pro-cyclicality. This is due to the absence of a rule that limits the withdrawals from the fund to finance budget deficit.