Policy Analysis for a Developing Country in a Financial CGE Model: Case of Tunisia After the 2011'S Revolution

No 1473, Working Papers from Economic Research Forum

Abstract: The macroeconomic fundamentals of the Tunisian economy deteriorated seriously after the 2011’s revolution. The objective of this paper is to assess to which extent it was possible for Tunisia to realize better macroeconomic performance through alternative economic policy choices taking into account the domestic and external shocks. To that end, the paper employs a financial dynamic general equilibrium model calibrated using six flow-of-funds accounts representing the Tunisian economy in 2010. In a first stage, I reproduce the main macroeconomic variables observed for the Tunisian economy during the period 2011-2018. In a second stage, the model is used to compare the Tunisian macroeconomic performance during that period with counterfactual scenarios. The results show that the economy would have performed much better, in relation to a battery of macroeconomic indicators (economic growth, unemployment, public external and domestic debts, current account, fiscal balance) under alternative economic policies, given the same conditions of internal and external shocks. The most impactful results are obtained under the scenario a total factor productivity’s growth at its average level during 2001-2010. Indeed, the average yearly gain in terms of GDP growth would have been of 3.45 percentage points and the average unemployment rate reduced by 7 percentage points to reach 9%. The domestic and external domestic debt stock would have been much lower than the actual average, by reaching respectively 16.3% and 18% of the GDP.

Pages: 20
Date: 2021-07-20, Revised 2021-07-20
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