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Commodity Price Shocks and the Odds on Fiscal Performance

Author/Editor: Kumah, Francis Y. | Matovu, John | International Monetary Fund. Middle East and Central Asia Dept.
Authorized for Distribution: September 1, 2005
Electronic Access: Free Full Text (PDF file size is 667KB)
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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: Unanticipated changes in commodity prices can generate significant movements in fiscal aggregates. This paper seeks to understand the dynamics of these fiscal movements in the context of transitory commodity price shocks using sample data from four CIS countries- two oil-producing and two non-oil commodity-intensive countries. It adopts a structural VAR approach and identifies the dynamic effects of commodity price shocks on fiscal performance under two broad tax regimes. Stochastic simulations indicate high probabilities of fiscal overperformance in the short term when commodity prices are high. These probabilities deteriorate significantly, however, in the long term after the transitory positive commodity price shock has dissipated, particularly when lax fiscal policy is adopted during the period of the price boom.
 
Series: Working Paper No. 05/171
Subject(s): Commodity price fluctuations | Fiscal policy | Tax systems
Author's keyword(s): Commodity price shocks | Strucral VAR | tax regimes | pro-cyclical fiscal policy
 
English  
    Published:   September 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005171   Pages:   35
    Price:   US$15.00
       
     
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