ORCID
Paulo Medas 0000-0002-1378-1534
Keywords
commodity prices; resource-rich countries; procyclical fiscal policy; fiscal rules
Abstract
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, either through larger spending at times of commodity busts or lower spending during commodity booms. 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. Further, we find that the adoption of fiscal rules does not seem to reduce procyclicality in a significant way, but the quality of political institutions does matter. Finally, we find that non-commodity revenues tend to respond only to persistent changes in commodity prices.
Recommended Citation
Bova, E., Medas, P., & Poghosyan, T. (2024). Macroeconomic Stability in Resource-rich Countries: The Role of Fiscal Policy. Journal of Banking and Financial Economics, 2018(9), 103-122. https://doi.org/10.7172/2353-6845.jbfe.2018.1.5
First Page
103
Last Page
122
Page Count
20
Received Date
07 February 2018
Revised Date
06 April 2018
Accept Date
17 April 2018
Online Available Date
11 May 2018
DOI
10.7172/2353-6845.jbfe.2018.1.5
JEL Code
O13; H30; C33
Publisher
University of Warsaw