Do Fiscal Policy Outcomes Promote Ethno-Religious Stability in African States?

This paper studies the conditions under which the use of expansionary fiscal policy may mitigate the risk of initiation, escalation, and repeated cycles of conflict on the African continent. To date, empirical evidence highlighting the effectiveness of expansionary fiscal policy as a means of mitigating conflict in Africa is still limited. This article is an attempt to fill this gap as it addresses this important empirical question in conflict-plagued Africa. The study further expands on previous studies by examining the efficacy of increased government expenditure on conflict in general, as well as on the ethnic and religious dimensions of conflict in Africa. The most encountered forms of conflict in recent times are those that cannot be neatly classified as war, peace, criminal violence or political violence. Ethnic and religious conflicts often fall into this class. This study finds that overall, non-military government expenditures across African states have played a significant role in minimizing general internal conflict, as well as ethnic and religious conflicts. Using data for 32 African nations for the period 1990-2016, the empirical analyses show that raising overall government expenditure can induce reductions in overall internal, ethnic and religious conflicts. The results suggest that total government expenditure has a stronger impact on the reduction of ethnic conflict on the continent. Empirical outcomes also show that causality varies across countries on the continent, an indication that the relationship between conflict and government expenditure is heterogeneous in nature across the continent. The causal effect of government expenditure is however most widespread for ethnic conflict.