TITLE:
An Evaluation of Lesotho’s Fiscal Policy Stance across the Business Cycle
AUTHORS:
Moeti Damane
KEYWORDS:
Fiscal Policy Stance, Output Gap, Cyclically Adjusted Fiscal Balance, Business Cycle, Lesotho
JOURNAL NAME:
Modern Economy,
Vol.13 No.3,
March
14,
2022
ABSTRACT: This paper calculates
Lesotho’s cyclically adjusted primary budget balance (CAPB) and evaluates the
country’s fiscal policy stance across the business cycle, between 2007Q1 to
2019Q4. The study identified four peaks and four troughs over the review
period. The stance of fiscal policy was found to be generally pro-cyclical to
neutral in the early periods of contraction, before turning counter-cyclical,
albeit accompanied by relatively high levels of public debt and low levels of
GDP growth. During recovery and expansion periods, the fiscal stance was
broadly counter cyclical, with low levels of GDP growth and debt levels
comparable to those in the contractionary periods.