Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy
Resource-rich countries face large and persistent shocks, especially coming from volatile commodity prices. Given the severity of the shocks, it would be expected that these countries adopt countercyclical fiscal policies to help shield the domestic economy, either through larger spendin...
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| Format: | Article |
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University of Warsaw
2018-05-01
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| Series: | Journal of Banking and Financial Economics |
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| Online Access: | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1059&context=jbfe |
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| author | Elva Bova Paulo Medas Tigran Poghosyan |
| author_facet | Elva Bova Paulo Medas Tigran Poghosyan |
| author_sort | Elva Bova |
| collection | DOAJ |
| description | Resource-rich countries face large and persistent shocks, especially coming from volatile commodity prices. Given the severity of the shocks, it would be expected that these countries adopt countercyclical fiscal policies to help shield the domestic economy, either through larger spending at times of commodity busts or lower spending during commodity booms. Taking advantage of a new dataset covering 48 non-renewable commodity exporters for the period 1970–2014, we investigate whether fiscal policy does indeed play a stabilizing role. Our analysis shows that fiscal policy tends to have a procyclical bias (mainly via expenditures) and, contrary to others, we do not find evidence that this bias has declined in recent years. Further, we find that the adoption of fiscal rules does not seem to reduce procyclicality in a significant way, but the quality of political institutions does matter. Finally, we find that non-commodity revenues tend to respond only to persistent changes in commodity prices. |
| format | Article |
| id | doaj-art-ed078bb0a96141fb9610c17f2a9ea520 |
| institution | Kabale University |
| issn | 2353-6845 |
| language | English |
| publishDate | 2018-05-01 |
| publisher | University of Warsaw |
| record_format | Article |
| series | Journal of Banking and Financial Economics |
| spelling | doaj-art-ed078bb0a96141fb9610c17f2a9ea5202025-01-02T23:18:05ZengUniversity of WarsawJournal of Banking and Financial Economics2353-68452018-05-012018110312210.7172/2353-6845.jbfe.2018.1.5Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal PolicyElva Bova0Paulo Medas1Tigran Poghosyan2European Commission, BelgiumInternational Monetary Fund, USAInternational Monetary Fund, USAResource-rich countries face large and persistent shocks, especially coming from volatile commodity prices. Given the severity of the shocks, it would be expected that these countries adopt countercyclical fiscal policies to help shield the domestic economy, either through larger spending at times of commodity busts or lower spending during commodity booms. Taking advantage of a new dataset covering 48 non-renewable commodity exporters for the period 1970–2014, we investigate whether fiscal policy does indeed play a stabilizing role. Our analysis shows that fiscal policy tends to have a procyclical bias (mainly via expenditures) and, contrary to others, we do not find evidence that this bias has declined in recent years. Further, we find that the adoption of fiscal rules does not seem to reduce procyclicality in a significant way, but the quality of political institutions does matter. Finally, we find that non-commodity revenues tend to respond only to persistent changes in commodity prices.https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1059&context=jbfecommodity pricesresource-rich countriesprocyclical fiscal policyfiscal rules |
| spellingShingle | Elva Bova Paulo Medas Tigran Poghosyan Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy Journal of Banking and Financial Economics commodity prices resource-rich countries procyclical fiscal policy fiscal rules |
| title | Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy |
| title_full | Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy |
| title_fullStr | Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy |
| title_full_unstemmed | Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy |
| title_short | Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy |
| title_sort | macroeconomic stability in resource rich countries the role of fiscal policy |
| topic | commodity prices resource-rich countries procyclical fiscal policy fiscal rules |
| url | https://press.wz.uw.edu.pl/cgi/viewcontent.cgi?article=1059&context=jbfe |
| work_keys_str_mv | AT elvabova macroeconomicstabilityinresourcerichcountriestheroleoffiscalpolicy AT paulomedas macroeconomicstabilityinresourcerichcountriestheroleoffiscalpolicy AT tigranpoghosyan macroeconomicstabilityinresourcerichcountriestheroleoffiscalpolicy |