Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?

July 1, 2011

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Format: Chicago

Nese Erbil. Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?, (USA: International Monetary Fund, 2011) 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

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.

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

Keywords: Countercyclical fiscal policies, Country, Financing constraint, Fiscal Policy, Fiscal policy Procyclical, Gas and mining taxes, Global, Govenment expenditure, Institutions, Low income, Macroeconomic policy, Oil, Oil price volatility, Oil producing countries, Oil revenue, Personal income, Procyclical fiscal policy, Revenue, Stabilization fund, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/171
Stock No:

WPIEA2011171
ISBN:

9781462314324
ISSN:

1018-5941

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