Fiscal Rules for Commodity Exporters:Prudence and Procyclicality
AbstractThis paper compares welfare levels under alternative fiscal rules for small open, commodity exporter, economies whose fiscal income varies with the world commodity price (in a dynamic, stochastic, and general equilibrium setting). Between the extremes of a procyclical balanced budget policy and an acyclical spending rule, there is a continuum of rules. Thus, the best degree of spending stabilization is found. The acylical rule benefits households that do not enjoy access to capital markets by providing a financial cushion that they themselves cannot provide, boosting their mean consumption. However, households that enjoy full access to capital markets suffer under this rule, since the government reduces their role in smoothing consumption and accumulating assets.
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Bibliographic InfoPaper provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv227.
Length: 45 pages
Date of creation: Dec 2009
Date of revision:
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-24 (All new papers)
- NEP-DGE-2010-07-24 (Dynamic General Equilibrium)
- NEP-MAC-2010-07-24 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stephanie Schmitt-Grohé & Martín Uribe, 2007.
"Optimal simple and implementable monetary and fiscal rules,"
2007-24, Federal Reserve Bank of Atlanta.
- Schmitt-Grohe, Stephanie & Uribe, Martin, 2007. "Optimal simple and implementable monetary and fiscal rules," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1702-1725, September.
- Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," NBER Working Papers 10253, National Bureau of Economic Research, Inc.
- Schmitt-Grohé, Stephanie & Uribe, Martín, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," CEPR Discussion Papers 4334, C.E.P.R. Discussion Papers.
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