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Fiscal Policy in Oil Producing Countries During the Recent Oil Price Cycle

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  • International Monetary Fund
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    Abstract

    This paper presents a detailed analysis of the average fiscal policy responses of oil producing countries (OPCs) to the recent oil price cycle. We find that OPCs worsened their non-oil primary balances substantially during 2003-2008 driven by an increase in primary spending. However, this trend was partially reversed when oil prices went down in 2009. We also find evidence that fiscal policy has been procyclical and has hence exacerbated the fluctuations in economic activity. In addition, we estimate that a small reduction in oil prices could lead to very large financing needs in the near future. Finally, we show that long-term fiscal sustainability positions in OPCs have worsened.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23592
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/28.

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    Length: 24
    Date of creation: 01 Feb 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/28

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    Related research

    Keywords: Oil producing countries; Commodity price fluctuations; Fiscal sustainability; Nonoil sector; Oil prices; Oil production; Oil revenues; Consumption;

    This paper has been announced in the following NEP Reports:

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    Cited by:
    1. Luis Felipe Céspedes & Andrés Velasco, 2011. "Was This Time Different?: Fiscal Policy in Commodity Republics," BIS Working Papers 365, Bank for International Settlements.
    2. Nese Erbil, 2011. "Is Fiscal Policy Procyclical in Developing Oil-Producing Countries?," IMF Working Papers 11/171, International Monetary Fund.
    3. Rigoberto Ariel Yépez-Garcia & Julie Dana, 2012. "Mitigating Vulnerability to High and Volatile Oil Prices : Power Sector Experience in Latin America and the Caribbean," World Bank Publications, The World Bank, number 9341, March.
    4. 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.

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