Fiscal adjustment and growth in Côte d'Ivoire

The Ivorian Government resorts to public spending cuts, particularly investment, for its current fiscal adjustment. This paper which hypothesizes that this pattern is likely to induce recession, focuses on the relationship between adjustment and growth in Côte d'Ivoire. Using a specific growth model, the paper establishes that public investment has a net crowding-in effect on the private sector and a positive impact on growth. Hence, public investment cuts bring about a decline in output. Simulations of alternative policies show that the best suited one, e.g. which reduces the fiscal deficit while preserving growth, supposes an increase in public investment, cuts in public consumption, and a decrease in taxes and tariffs on the external sector.