Cyclical Fiscal Rules for Oil-Exporting Countries

November 6, 2013

Preview Citation

Format: Chicago

Stephen Snudden. Cyclical Fiscal Rules for Oil-Exporting Countries, (USA: International Monetary Fund, 2013) accessed December 22, 2024

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.

Subject: Commodities, Fiscal policy, Fiscal rules, Inflation, Oil, Oil prices, Prices

Keywords: Automatic stabilizers, Commodity price uncertainty, Consumption basket, Core inflation, Core-inflation targeting monetary policy regime, Countercyclical fiscal policy, Countercyclical monetary policy, Demand shock, Exchange rate, Fiscal policy behavior, Fiscal policy rules, Fiscal policy stance, Fiscal rules, Global, Headline inflation, Inflation, Macroeconomic policy, Oil, Oil price, Oil prices, Oil-price shock, Oil-revenues gap, Structural surplus, Tax-revenue gap, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/229
Stock No:

WPIEA2013229
ISBN:

9781475514018
ISSN:

1018-5941

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