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Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules

Author

Listed:
  • Sweder van Wijnbergen

    (University of Amsterdam)

  • Nina Budina

    (IMF)

Abstract

This discussion paper resulted in a publication in the 'Economics of Transition' , 2011, 19(4), 639-666. 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.

Suggested Citation

  • Sweder van Wijnbergen & Nina Budina, 2011. "Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules," Tinbergen Institute Discussion Papers 11-068/2, Tinbergen Institute, revised 16 May 2011.
    • Handle: RePEc:tin:wpaper:20110068
    as

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    References listed on IDEAS

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    5. Andreas Schabert & Sweder J G van Wijnbergen, 2014. "Sovereign Default and the Stability of Inflation-Targeting Regimes," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(2), pages 261-287, June.
    6. International Monetary Fund, 2002. "Republic of Kazakhstan: Selected Issues and Statistical Appendix," IMF Staff Country Reports 2002/064, International Monetary Fund.
    7. Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 494-513, May.
    8. Mr. Nigel A Chalk, 1998. "Fiscal Sustainability with Non-Renewable Resources," IMF Working Papers 1998/026, International Monetary Fund.
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    11. Bohn, Henning, 2007. "Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1837-1847, October.
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    Citations

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    Cited by:

    1. Landon, Stuart & Smith, Constance, 2017. "Does the design of a fiscal rule matter for welfare?," Economic Modelling, Elsevier, vol. 63(C), pages 226-237.
    2. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Sweder Wijnbergen & Alexander France, 2012. "Assessing Debt Sustainability in a Stochastic Environment: 200 Years of Dutch Debt and Deficit Management," De Economist, Springer, vol. 160(3), pages 219-236, September.
    4. Giovanni Covi, 2014. "Dutch disease and sustainability of the Russian political economy," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2014(2), pages 75-110.
    5. Ibrahim Elbadawi & Mohamed Goaied & Moez Ben Tahar, 2017. "Fiscal- Monetary Interdependence and Exchange Rate Regimes in Oil Dependent Arab Economies," Working Papers 1116, Economic Research Forum, revised 07 Jun 2017.
    6. Banegas Rivero, Roger Alejandro & Vergara González, Reyna, 2019. "Evaluación de escenarios fiscales para Bolivia," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 32, pages 132-168, November.

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    More about this item

    Keywords

    volatility; oil wealth; fiscal sustainability;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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