The Impact of Political Instability on the Budget Deficit: Evidence from the MENA Region

Gouasmi, zeineb and El Ferktaji, riadh (2025): The Impact of Political Instability on the Budget Deficit: Evidence from the MENA Region.

Abstract

The revolutions in the MENA region countries were experienced as a negative economic shock. This led to popular demands and, at the same time, a worsening of public finances in a climate of political instability. It is therefore relevant to address the question: Is the reduction of the budget deficit dependent on explanatory political variables such as democracy and political stability? In this article, we examined the relationship between the budget deficit and political instability/democracy while using other macroeconomic control variables, such as GDP growth, the consumer price index, and oil prices. This relationship was estimated for a sample of MENA region countries using a dynamic panel data econometric model over the period 2008-2019. The results of this article show that political instability and democracy have a significant impact on the budget deficit in the selected group of MENA region countries. Specifically, the model's estimation found that the democratic political regime positively impacts the budget balance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Budget Deficit. Political instability. MENA Region
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus

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