The Impact of Fiscal Policy on Manufacturing Sector Output: Empirical Study Evidance from Algeria (1999-2021)

Abstract

Do to Due to the importance of fiscal policy and the Manufacturing Sector Output, this study came to looking at the effects of fiscal policy instruments during the period (1999-2021) on the Manufacturing Sector Output in the Algerian economy, through studying the impact of the General Government Final Consumption Expenditure (GEXP), Inflation (INF), Oil Rents (OR),Trade openness (OPP), and Real Interest Rate (RIR) on the Industry (Indu) output. The long-run equilibrium relationship between study variables was estimated. The present Study relies on The Bounds testing Methodology, Using the Autoregressive Distributed Lag (ARDL) co-integration framework. The results confirm that a stable long-run relationship exists between the study variables, and the results show that the government expenditure have a negative and significant impact on the industry output in the short and the long term. Finally, the study suggests that government expenditure put more efforts in providing capital infrastructures to further enhance manufacturing sector‟s productive and utilisation capacity. The study also recommended that the corporate income tax should be reduced by the government to encourage actual and potential investors in this sector.