Cyclical Fiscal Rules for Oil-Exporting Countries

Author/Editor: Stephen Snudden
Publication Date: November 06, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Structural budget-balance rules with countercyclical elements appear well suited to stabilize the macroeconomic volatility of oil-exporting countries and have been used successfully by other commodity exporters. Using a global DSGE model, the efficient design of such rules is found to depend on the source of oil price fluctuations and the oil exporters’ structural characteristics. The output-inflation tradeoff is of particular concern for oil exporters relative to non-oil exporters due to the pass through of oil prices into headline inflation. Fiscal rules are best when coordinated with inflation targeting monetary policy, but are still desirable for fixed exchange rate regimes.
Series: Working Paper No. 13/229
Subject(s): Fiscal policy | Oil exporting countries | Oil prices | Business cycles | External shocks | Demand | Monetary policy | Economic models

Publication Date: November 06, 2013
ISBN/ISSN: 9781475514018/1018-5941 Format: Paper
Stock No: WPIEA2013229 Pages: 45
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