The Effect of Budgetary Policies on the Economy Activity in Algeria: A Markov Switching Approach

This study aims to highlight the effect of budgetary policies on the economy activity in Algerian for the period 1986 to 2014. Contrary to prior studies, our analysis opts for a recent and robust technical setting within the framework of Markov switching models. The findings indicate that a deterioration of the balance is favorable to the activity; this situation describes a Keynesian nature (Budget deficit helps boost economic activity). The improvement of budget balance improves economic activity. This is the classic nature (according to the Classics, the financing of activity by the budget deficit has a negative effect on economic activity) according to the terminology of the study. The findings could help policymakers to establish efficient economic decisions to boost the economy. Favorable economic repercussions may result from an effective policy coordination in decision-making.