Macroeconomic Stability in Resource-Rich Countries : The Role of Fiscal Policy

Author/Editor:

Elva Bova ; Paulo A Medas ; Tigran Poghosyan

Publication Date:

February 23, 2016

Electronic Access:

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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:

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. 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. Adoption of fiscal rules does not seem to reduce procyclicality in a significant way, but the quality of political institutions does matter. Finally, non-commodity revenues tend to respond only to persistent changes in commodity prices.

Series:

Working Paper No. 16/36

Subject:

English

Publication Date:

February 23, 2016

ISBN/ISSN:

9781475596465/1018-5941

Stock No:

WPIA2016036

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

28

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