Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela

December 1, 2005

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Alfredo Baldini. Fiscal Policy and Business Cycles in an Oil-Producing Economy: The Case of Venezuela, (USA: International Monetary Fund, 2005) accessed November 21, 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

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. However, 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. In particular, 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.

Subject: Business cycles, Expenditure, Fiscal policy, Fiscal stance, Oil, gas and mining taxes

Keywords: HP filter, Oil GDP, Oil revenue, Output gap, Revenue volatility, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/237
Stock No:

WPIEA2005237
ISBN:

9781451862560
ISSN:

1018-5941

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