Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela
IMF Working Papers, December 1, 2005
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- Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela
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Bibliographic details
- Authors: Alfredo Baldini
- Published: December 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451862560.001
Summary
- This paper analyzes the fiscal policy in Venezuela during 1991-2003, by using a number of statistical approaches to analyze trends and cycles of economic output and fiscal outcomes.
- The business cycle features a strong dominance of short-term cyclical components—each cycle having an average duration of about two to three years.
- The cyclical volatility of non-oil sector GDP is more than two times as large as the volatility of oil sector GDP.
- On the fiscal side, while oil revenues are independent of the business cycle, all the other main fiscal variables exhibit strong procyclicality.
- Fiscal procyclicality is higher during good times than bad times, which could be related to the existence of "voracity effects."
- The discretionary component of fiscal policy is as volatile as the component induced by the business cycle.
Key findings and observations
- Business cycle characteristics:
- Average cycle duration: about two to three years.
- Dominance of short-term cyclical components in the business cycle.
- Sectoral volatility:
- Cyclical volatility of non-oil sector GDP is more than two times as large as cyclical volatility of oil sector GDP.
- Fiscal dynamics:
- Oil revenues are independent of the business cycle.
- All other main fiscal variables exhibit strong procyclicality.
- Procyclicality is higher during good times than bad times (possible "voracity effects").
- Discretionary fiscal policy component is as volatile as the cycle-induced fiscal component.
Methodology and scope
- Time period analyzed: 1991-2003.
- Approaches: a number of statistical approaches to analyze trends and cycles of economic output and fiscal outcomes.
- Subject and keywords listed in the source: Business cycles, Expenditure, Fiscal policy, Fiscal stance, Oil, gas and mining taxes; HP filter, oil GDP, oil revenue, output gap, revenue volatility, WP.