Description

This paper studies the role of fiscal policies and institutions in building resilience in sub-Saharan
 African countries during 1990-2013, with specific emphasis on a group of twenty-six countries that
 were deemed fragile in the 1990s. As the drivers of fragility and resilience are closely intertwined, we
 use GMM estimation as well as a probabilistic framework to address endogeneity and reverse
 causality. We find that fiscal institutions and fiscal space, namely the capacity to raise tax revenue
 and contain current spending, as well as lower military spending and, to some extent, higher social
 expenditure, are significantly and fairly robustly associated with building resilience. Similar
 conclusions arise from a study of the progression of a group of seven out of the twenty-six sub-
 Saharan African countries that managed to build resilience after years of civil unrest and/or violent
 conflict. These findings suggest relatively high returns to focusing on building sound fiscal
 institutions in fragile states. The international community can help this process through policy advice,
 technical assistance, and training on tax administration and budget reforms.

More publications in this series: Working Papers

More publications by: Corinne Deléchat ; Ejona Fuli ; Dafina Glaser ; Gustavo Ramirez ; Rui Xu