Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2011-04-15
Revision-Date: 2011-05-16
Number: 11-068/2
Author-Name: Sweder van Wijnbergen
Author-Workplace-Name: University of Amsterdam
Author-Name: Nina Budina
Author-Workplace-Name: IMF
Title: Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules
Abstract: This discussion paper resulted in a publication in the <A href="https://onlinelibrary.wiley.com/doi/10.1111/j.1468-0351.2011.00425.x/abstract;jsessionid=F64011DF99B22B6E2BF33FDA1C47DE9C.f04t03">'Economics of Transition'</A>, 2011, 19(4), 639-666.<P>

Whether fiscal policy is sustainable depends on a government's future revenue and expenditure streams, both of which are highly uncertain. In commodity-rich countries, this problem is intensified by unpredictable and volatile commodity prices. We show how spending rules for oil income and non-oil primary deficits interact and influence the stochastic distribution of future debt stocks and demonstrate the variance reducing impact of feedback rules for primary deficits in a case study of oil-and-gas exporter Azerbaijan.
Classification-JEL: E21, E27
Keywords: volatility, oil wealth, fiscal sustainability
File-Url: https://papers.tinbergen.nl/11068.pdf
File-Format: application/pdf
File-Size: 222254 bytes
Handle: RePEc:tin:wpaper:20110068