Threshold effect of fiscal policy on private consumption : Evidence from Tunisia

Wissem Khanfir
JEL codes: 
C24 - Truncated and Censored Models; Switching Regression Models, E21 - Consumption; Saving; Wealth, E62 - Fiscal Policy.
Using a threshold regression model, we analyse the impact of fiscal policy on private consumption in Tunisia, over the 1975-2010 period. Our empirical results revealed that public expenditure and tax revenues have Keynesian effects on consumption, when private debt/GDP ratio is below 48 %. This effect becomes non-Keynesian once this threshold is exceeded. We provide empirical evidence that private consumption reacts in non-linear fashion to changes in fiscal policy.
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