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Fiscal Policy and Business Cycles in an Oil-Producing Economy

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  • Alfredo Baldini

Abstract

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/237.

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Length: 44
Date of creation: 01 Dec 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/237

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Keywords: Oil sector; fiscal policy; fiscal outcomes; fiscal stance; expenditures; expenditure; fiscal variables; fiscal impulse; public spending; fiscal balance; public debt; expenditure growth; total expenditures; public expenditures; primary expenditure; taxation; public expenditure; government spending; interest expenditure; fiscal policies; total expenditure; fiscal policy formulation; fiscal affairs; fiscal side; primary deficit; fiscal outcome; fiscal aggregates; fiscal affairs department; structural fiscal; debt service; fiscal budget; expenditure restraint; tax base; fiscal data; fiscal revenues; government revenue; discretionary fiscal policy; fiscal balances; fiscal variable; aggregate demand; fiscal discipline; public sector expenditure; fiscal performance; fiscal aggregate; tax administration; fiscal deficit; fiscal redistribution; sector expenditure;

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  1. Alberto Alesina & Ricardo Hausmann & Rudolf Hommes & Ernesto Stein, 1996. "Budget Institutions and Fiscal Performance in Latin America," NBER Working Papers 5586, National Bureau of Economic Research, Inc.
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  14. Ricardo Hausmann & Roberto Rigobon, 2003. "An Alternative Interpretation of the 'Resource Curse': Theory and Policy Implications," NBER Working Papers 9424, National Bureau of Economic Research, Inc.
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  16. Antonio Spilimbergo, 2007. "Measuring the Performance of Fiscal Policy in Russia," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(6), pages 25-44, November.
  17. Finn E. Kydland & Calos E.J.M.Zarazaga, 1997. "Is the business cycle of Argentina "different?"," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 21-36.
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Cited by:
  1. Delavari, Majid & Mohammadali, Hanieh & Naderi, Esmaeil & Gandali Alikhani, Nadiya, 2011. "The sources of Iran's Business Cycles," MPRA Paper 46756, University Library of Munich, Germany.
  2. Kamilya Tazhibayeva & Aasim M. Husain & Anna Ter-Martirosyan, 2008. "Fiscal Policy and Economic Cycles in Oil-Exporting Countries," IMF Working Papers 08/253, International Monetary Fund.

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