Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?

Author/Editor:

Nese Erbil

Publication Date:

July 1, 2011

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

This paper examines the cyclicality of fiscal behavior in 28 developing oil-producing countries (OPCs) during 1990-2009. After testing five fiscal measures - government expenditure, consumption, investment, non-oil revenue, and non-oil primary balance - and correcting for reverse causality between non-oil output and fiscal variables, the results suggest that all of the five fiscal variables are strongly procyclical in the full sample. Also, the results are not uniform across income groups: expenditure is procyclical in the low and middle-income countries, while it is countercyclical in the high-income countries. Fiscal policy tends to be affected by the external financing constraints in the middle- and high-income groups. However, the quality of institutions and political structure appear to be more significant for the low-income group.

Series:

Working Paper No. 2011/171

Subject:

Expenditure Fiscal policy National accounts Oil, gas and mining taxes Personal income Procyclical fiscal policy Taxes

English

Publication Date:

July 1, 2011

ISBN/ISSN:

9781462314324/1018-5941

Stock No:

WPIEA2011171

Pages:

32

Please address any questions about this title to publications@imf.org