Download or read book Is Fiscal Policy Procyclical in Developing Oil Producing Countries written by Nese Erbil and published by . This book was released on 2011-07-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures - government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance - and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample. Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group.

Download or read book Fiscal Policy in Oil Producing Countries During the Recent Oil Price Cycle written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-02-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a detailed analysis of the average fiscal policy responses of oil producing countries (OPCs) to the recent oil price cycle. We find that OPCs worsened their non-oil primary balances substantially during 2003-2008 driven by an increase in primary spending. However, this trend was partially reversed when oil prices went down in 2009. We also find evidence that fiscal policy has been procyclical and has hence exacerbated the fluctuations in economic activity. In addition, we estimate that a small reduction in oil prices could lead to very large financing needs in the near future. Finally, we show that long-term fiscal sustainability positions in OPCs have worsened.

Download or read book Fiscal Policy in Oil Producing Countries During the Recent Oil Price Cycle written by Mauricio Villafuerte and published by . This book was released on 2010 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Operational Aspects of Fiscal Policy in Oil Producing Countries written by Steven A. Barnett and published by . This book was released on 2006 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Oil-producing countries face challenges arising from the fact that oil revenue is exhaustible, volatile, and uncertain, and largely originates from abroad. Reflecting these challenges, the paper proposes some important general principles for the formulation and assessment of fiscal policy in these countries. The main findings can be summarized in some key guidelines: the non-oil balance should feature prominently in the formulation of fiscal policy; it should generally be adjusted gradually; the government should strive to accumulate substantial financial assets over the period of oil production; and, where necessary, strategies should aim at breaking procyclical fiscal responses to volatile oil prices.

Download or read book Procyclical Fiscal Policy written by Toshihiro Ihori and published by Springer. This book was released on 2018-12-28 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom dictates that a fiscal policy should be counter-cyclical. However, contrary to this conventional views, recent research has demonstrated that fiscal policy is actually procyclical in most developing countries. In this book, we attempt to propose a new interpretation of this procyclicality after reviewing theoretical and empirical evolution of the research. In particular, by incorporating the political effort behavior of private agents into a weak government model, we explore how income fluctuations affect the optimal budget deficits in a political economy. If the government can control the political behavior, normally, the optimal budget deficit should rise in a recession as a first-best case; however, interestingly, a recession does not necessarily prompt an increase in the budget deficits in a second-best political economy. The response of the budget deficits to income fluctuations mainly depends on the efficiency of political effort, which may correspond to the degree of democracy and bureaucratic efficiency of the governments. We test the prediction of the pro-cyclical fiscal policy and find it applicable for democratic countries with semi-efficient governments including Japan.

Download or read book Rethinking Fiscal Policy in Oil Exporting Countries written by Mr.Tokhir N Mirzoev and published by International Monetary Fund. This book was released on 2019-05-17 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the existing fiscal policy paradigm in commodity-exporting countries. First, we argue that its centerpiece—the permanent income hypothesis (PIH)—is not consistent with either intergenerational equity or long-term sustainability in the presence of uncertainty. Policies to achieve these goals need to be more prudent and better anchored than the PIH. Second, we point out the presence of a volatility tradeoff between government spending and wealth and re-assess long-held views on the appropriate fiscal anchors, the vice of procyclicality, and the (im)possibility of simultaneously smoothing consumption and ensuring intergenerational equity and sustainability. Finally, we propose what we call a prudent wealth stabilization policy that would be more consistent with long-term fiscal policy goals, yet relatively simple to implement and communicate.

Download or read book Fiscal Rules and the Procyclicality of Fiscal Policy in the Developing World written by Ms.Elva Bova and published by International Monetary Fund. This book was released on 2014-07-10 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper documents the spread of fiscal rules in the developing world and investigates the relation between fiscal rules and procyclical fiscal policy. We find that, since the early 2000s, developing countries outnumbered advanced economies as users of fiscal rules. Rules were adopted either as part of the toolkit to join currency unions or to strengthen fiscal frameworks during and after large stabilization and policy reform episodes. The paper also finds that the greater use of fiscal rules has not shielded these countries from procyclicality, since fiscal policy remains procyclical following the adoption of a fiscal rule. We find partial evidence that some features of “second generation” rules, such as the use of cyclically-adjusted targets, well-defined escape clauses, together with stronger legal and enforcement arrangements, may be associated with less procyclicality.

Download or read book Fiscal Policy and Economic Cycles in Oil exporting Countries written by Aasim M. Husain and published by . This book was released on 2008 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically assesses the impact of oil price shocks on the underlying non-oil economic cycle in oil-exporting countries. Panel VAR analysis and the associated impulse responses indicate that in countries where the oil sector is large in relation to the economy, oil price changes affect the economic cycle only through their impact on fiscal policy. Once fiscal policy changes are removed, oil price shocks do not have a significant independent effect on the economic cycle.

Download or read book The Cyclicality of Fiscal Policies in the CEMAC Region written by Mr.Gaston K. Mpatswe and published by International Monetary Fund. This book was released on 2011-08-01 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines fiscal cyclicality in the CEMAC region during 1980-2008. The issue has attracted very little empirical interest but is important if fiscal policies are to play a role in mitigating external shocks that exacerbate economic cycles across the region. We assess whether fiscal policies across these six countries have been procyclical using panel data to elaborate our analysis. Like in other sub-Saharan countries, total public expenditure in the CEMAC is found to be strongly procyclical. This is most pronounced for public investment, which overreacts to output growth with elasticity above 1. We further find that institutional weaknesses and poor governance partly explain this behavior. In contrast, the existence of an IMF-supported program can be a counterbalancing influence in attenuating this bias.

Download or read book Fiscal Policy Sustainability in Oil Producing Countries written by Mrs.Claire Liuksila and published by International Monetary Fund. This book was released on 1994-11 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: Assessing the sustainability of a given fiscal policy is especially important for countries that depend on income from exhaustible resources. Political and growth pressures may push governments to raise expenditure when revenue from exhaustible resources rises, but cutting outlays when price swings reduce income is often difficult. Traditional fiscal accounting may give a misleading view of policy sustainability. This paper argues that for countries in which a significant proportion of government revenue is derived from the exploitation of an exhaustible natural resource, fiscal policy sustainability can best be assessed within a permanent income framework that takes into account total government wealth, including the imputed wealth from reserves of natural resources. Using this framework, the paper takes a sample of six countries where government revenue from petroleum extraction is significant and draws conclusions about the sustainability of their fiscal policies during 1980-92.

Download or read book Procyclical Fiscal Policy Shocks Rules and Institutions A View From MARS written by Paolo Manasse and published by INTERNATIONAL MONETARY FUND. This book was released on 2006-01-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the roles of shocks, rules, and institutions as possible sources of procyclicality in fiscal policy. By employing parametric and nonparametric techniques, I reach the following four main conclusions. First, policymakers' reactions to the business cycle is different depending on the state of the economy-fiscal policy is "acyclical" during economic bad times, while it is largely procyclical during good times. Second, fiscal rules and fiscal responsibility laws tend to reduce the deficit bias on average, and seem to enhance, rather than to weaken, countercyclical policy. However, the evidence also suggests that fiscal frameworks do not exert independent effects when the quality of institutions is accounted for. Third, strong institutions are associated to a lower deficit bias, but their effect on procyclicality is different in good and bad times, and it is subject to decreasing returns. Fourth, unlike developed countries, fiscal policy in developing countries is procyclical even during (moderate) recessions; in "good times," however, fiscal policy is actually more procyclical in developed economies.

Download or read book Fiscal Policy Sustainability in Oil Producing Countries written by Claire Liuksila and published by . This book was released on 2006 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Assessing the sustainability of a given fiscal policy is especially important for countries that depend on income from exhaustible resources. Political and growth pressures may push governments to raise expenditure when revenue from exhaustible resources rises, but cutting outlays when price swings reduce income is often difficult. Traditional fiscal accounting may give a misleading view of policy sustainability. This paper argues that for countries in which a significant proportion of government revenue is derived from the exploitation of an exhaustible natural resource, fiscal policy sustainability can best be assessed within a permanent income framework that takes into account total government wealth, including the imputed wealth from reserves of natural resources. Using this framework, the paper takes a sample of six countries where government revenue from petroleum extraction is significant and draws conclusions about the sustainability of their fiscal policies during 1980-92.

Download or read book Fiscal Policy Rules for Oil Producing Countries A Welfare Based Assessment written by Wojciech Maliszewski and published by INTERNATIONAL MONETARY FUND. This book was released on 2009-06-01 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents numerical simulations of various fiscal rules for oil-producing countries. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non-oil growth prospects. The distribution of non-oil wealth is important for countries with relatively low oil reserves. Corrections for adjustment costs and uncertainty with respect to oil prices should be applied carefully. While avoiding sharp changes in the fiscal policy stance may be appealing, it is not necessarily optimal if the initial position is unsustainable. Ad hoc rules are shown to perform poorly. The analysis abstracts from several issues critical for developing a practical policy advice and should not be treated as a complete framework.

Download or read book Oil Shocks and the Cyclicality of Fiscal Policy in a Developing Oil Exporting Economy written by Alexandre Ernesto da Costa Antonio and published by . This book was released on 2018 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to assess the cyclicality of fiscal policy, its evolution over time and the effectiveness of fiscal rules in Angola, the second oil producer in Africa. Existing literature suggests that fiscal policy in commodity-exporting economies has become less pro-cyclical in the last decade, or at least has remained unchanged. Oil-exporting economies seem to be the exception to this pattern, and pro-cyclicality has increased even when fiscal rules to prevent it have been introduced. However, available evidence for oil-producers is based in findings for developed economies, such as, Norway, and not developing economies, despite their share of Global oil production. Our paper contributes to bridge this gap by assessing cyclicality, its time path, and the role of fiscal institutions that aim to reduce it, in a developing oil-rich economy, Angola. For this purpose we use time-varying techniques (rolling cointegration and VECM) to analyse previously unpublished data for the period 2004M1-2014M12. Our findings suggest that fiscal policy tends to be pro-cyclical to oil-shocks and that this has intensified after the 2007/8 Global Crisis. Further, we find that adjustment to long-run budget imbalances are achieved through revenue, rather than spending. Finally, we find that fiscal rules, such as, the Oil Price Differential Account or the Sovereign Wealth Fund have not been effective to tame this pro-cyclicality.

Download or read book Fiscal Policy in Developing Countries written by Roberto Perotti and published by World Bank Publications. This book was released on 2007 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys fiscal policy in developing countries from the point of view of long-run growth. The first section reviews existing methodologies to estimate the effects of fiscal policy shocks and of systematic fiscal policy, with time series or with cross-sectional methods, and their applicability to developing countries. The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. It also reviews the fuzzy debate on "fiscal space" and "macroeconomic space" - and the usefulness (or lack thereof) of these terms for policy analysis. The third section asks what theory tells us about the optimal cyclical behavior of fiscal policy in developing countries. It shows that it very much depends on the assumptions about the interactions between credit market imperfections at the individual, firms, or government level, and on the supply of external funds to the country. Different sets of assumptions lead to different implications about optimal cyclical behavior. The available evidence on the cyclical behavior of fiscal policy, and possible reasons for the observed prevalence of a procyclical behavior in developing countries, is also reviewed. If one agrees that fiscal policy is indeed less countercyclical than we think is optimal, the issue is how to correct the problem. One obvious question is why government do not self-insure, i.e. why they do not accumulate assets in upturns and decumulate them in downturns. This leads to the analysis of fiscal rules and stabilization funds, in the fourth section. The last section concludes with what the author considers important research and policy questions in each part.

Download or read book Why is Fiscal Policy Often Procyclical written by Alberto Alesina and published by . This book was released on 2005 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.

Download or read book Do Sovereign Wealth Funds Reduce Fiscal Policy Pro cyclicality New Evidence Using a Non Parametric Approach written by Mr. Ali J Al-Sadiq and published by International Monetary Fund. This book was released on 2023-06-23 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The heightened volatility of commodity prices in recent years, reflecting the effects of the pandemic and the war in Ukraine, begs the longstanding question of the optimal fiscal policy response to commodity price shocks. Fiscal performance in most commodity-exporting countries is typically shaped by shifts in commodity prices and economic activity, often resulting in procyclical fiscal policy. One way to minimize the procyclicality of fiscal policy is to set up a stabilization Sovereign Wealth Fund (SWF). While such funds can help smooth government consumption in good and bad times, the empirical evidence of their value so far has been inconclusive. However, using an unbalanced panel dataset for 182 countries during 1980-2019, with two econometric methods that address the selection-bias problem, we provide robust evidence that stabilization SWFs do indeed help smooth government consumption by reducing fiscal policy volatility associated with commodity price fluctuations.