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Fiscal Policy and Economic Cycles in Oil-Exporting Countries

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  • Kamilya Tazhibayeva
  • Aasim M. Husain
  • Anna Ter-Martirosyan
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    Abstract

    This paper empirically assesses the impact of oil price shocks on the underlying non-oil economic cycle in oil-exporting countries. Panel VAR analysis and the associated impulse responses indicate that in countries where the oil sector is large in relation to the economy, oil price changes affect the economic cycle only through their impact on fiscal policy. Once fiscal policy changes are removed, oil price shocks do not have a significant independent effect on the economic cycle.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/253.

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    Length: 21
    Date of creation: 01 Nov 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/253

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    Related research

    Keywords: Oil prices; Oil exporting countries; Nonoil sector; Economic growth; Economic models; fiscal policy; public spending; fiscal impulse; fiscal stance; oil sector; oil group; oil price changes; government spending; fiscal spending; government expenditure; fiscal revenue; ratio of public spending; oil-producing countries; opec; fiscal discipline; world oil prices; oil supply; taxation; fiscal deficits; fiscal stimulus; spot price; public debt; fiscal expansion; fiscal variables; central government expenditure; fiscal policy formulation; petroleum exporting countries; oil production; fiscal position; oil companies; fiscal response; fiscal deficit; fiscal rules; organization of petroleum exporting countries; higher oil prices; debt service; oil exports; fiscal performance; fiscal impact; oil ? group; fiscal balance; oil reserves;

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    References

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    1. Emmanuel Saez, 2002. "Direct or Indirect Tax Instruments for Redistribution: Short-run versus Long-run," NBER Working Papers 8833, National Bureau of Economic Research, Inc.
    2. Francis Y. Kumah & John Matovu, 2005. "Commodity Price Shocks and the Oddson Fiscal Performance," IMF Working Papers 05/171, International Monetary Fund.
    3. Lane, Philip R, 2003. "Business Cycles and Macroeconomic Policy in Emerging Market Economies," International Finance, Wiley Blackwell, vol. 6(1), pages 89-108, Spring.
    4. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
    5. Ravn, M.O., 1996. "Permanent and transitory shocks, and the UK business cycle," Discussion Paper Series In Economics And Econometrics 9627, Economics Division, School of Social Sciences, University of Southampton.
    6. Blejer, Mario I & Cheasty, Adrienne, 1991. "The Measurement of Fiscal Deficits: Analytical and Methodological Issues," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1644-78, December.
    7. Ardagna Silvia & Caselli Francesco & Lane Timothy, 2007. "Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-35, August.
    8. Alfredo Baldini, 2005. "Fiscal Policy and Business Cycles in an Oil-Producing Economy," IMF Working Papers 05/237, International Monetary Fund.
    9. Ardagna, Silvia & Caselli, Francesco & Lane, Timothy, 2004. "Fiscal discipline and the cost of public dept service: some estiames for OECD countries," Working Paper Series 0411, European Central Bank.
    10. Alexander W. Hoffmaister & Jorge Roldos, 1997. "Are Business Cycles Different in Asia and Latin America?," IMF Working Papers 97/9, International Monetary Fund.
    11. Kaiser, Regina & Maravall, Agustin, 2005. "Combining filter design with model-based filtering (with an application to business-cycle estimation)," International Journal of Forecasting, Elsevier, vol. 21(4), pages 691-710.
    12. Bankim Chadha & Eswar Prasad, 1993. "Interpreting the Cyclical Behavior of Prices," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 266-298, June.
    13. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
    14. 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.
    15. 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.
    16. C. John McDermott & Eswar Prasad & Pierre-Richard Agénor, 1999. "Macroeconomic Fluctuations in Developing Countries," IMF Working Papers 99/35, International Monetary Fund.
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    Cited by:
    1. Magda E. Kandil & Hanan Morsy, 2010. "Fiscal Stimulus and Credibility in Emerging Countries," IMF Working Papers 10/123, International Monetary Fund.
    2. Ali Alichi & Rabah Arezki, 2009. "An Alternative Explanation for the Resource Curse," IMF Working Papers 09/112, International Monetary Fund.
    3. Ali Alichi & Rabah Arezki, 2012. "An alternative explanation for the resource curse: the income effect channel," Applied Economics, Taylor & Francis Journals, vol. 44(22), pages 2881-2894, August.
    4. Korhonen, Iikka & Mehrotra, Aaron, 2009. "Real Exchange Rate, Output and Oil: Case of Four Large Energy Producers," BOFIT Discussion Papers 6/2009, Bank of Finland, Institute for Economies in Transition.
    5. El Anshasy, Amany A. & Bradley, Michael D., 2012. "Oil prices and the fiscal policy response in oil-exporting countries," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 605-620.
    6. Syed Abul Basher & Elsayed Mousa Elsamadisy, 2012. "Country heterogeneity and long-run determinants of inflation in the Gulf Arab states," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 36(2), pages 170-203, 06.
    7. Ruslan Aliyev, 2012. "Monetary Policy in Resource-Rich Developing Economies," CERGE-EI Working Papers wp466, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
    8. Basher, Syed Abul, 2010. "Has the non-oil sector decoupled from oil sector? A case study of Gulf Cooperation Council Countries," MPRA Paper 21059, University Library of Munich, Germany.
    9. El Anshasy, Amany A. & Katsaiti, Marina-Selini, 2013. "Natural resources and fiscal performance: Does good governance matter?," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 285-298.

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