Abstract:

This paper is trying to address the problem of sustainability of fiscal policy and budgetary deficit beginning with the identification of the concept of the latter relative to the two other adjacent concepts, and comes to study the solvency of the state and dynamics of public debt, and then through the analysis inter-temporal government budget constraint within two horizons: Infinite and finite horizon, this together with the econometrics tests used to assess the sustainability. We turn next to the econometric analysis of this subject and the fact that our theme Algerian economy for the period 1969-2012, which resulted in the cointegration and causality tests of the existence of a long-run and causal relationship between state revenues and expenditures with the mutual influence between them, which suggests the possibility of budgetary sustainability in Algeria toward Rush and Hakkio (1991) perspective. However, the estimation of the cointegration relationship detect the presence of weak sustainability toward Quintos (1995) perspective, has increased estimate of expenditure and income elasticities to averment this result where the spending elasticity was more then revenues elasticity, which means that the good performance of fiscal policy and stable rates of public debt and budgetary deficit is subject to public income and especially petroleum taxes, which are subject to the vagaries of oil prices in world markets, and this is what gives the vulnerabilities character on fiscal policy in Algeria, to keep the latter are affected by future fluctuations budgetary, which calls for making some structural budgetary adjustments. This raises to the fiscal policy in Algeria how to compensate the reduction in revenues, which guarantees the financial balances in the economy and preserve the solvency of the state.