Description

Resource-rich countries face large and persistent shocks, especially coming from volatile
 commodity prices. Given the severity of the shocks, it would be expected that these countries
 adopt countercyclical fiscal policies to help shield the domestic economy. Taking advantage
 of a new dataset covering 48 non-renewable commodity exporters for the period 1970-2014,
 we investigate whether fiscal policy does indeed play a stabilizing role. Our analysis shows
 that fiscal policy tends to have a procyclical bias (mainly via expenditures) and, contrary to
 others, we do not find evidence that this bias has declined in recent years. Adoption of fiscal
 rules does not seem to reduce procyclicality in a significant way, but the quality of political
 institutions does matter. Finally, non-commodity revenues tend to respond only to persistent
 changes in commodity prices.

More publications in this series: Working Papers

More publications by: Elva Bova ; Paulo A. Medas ; Tigran Poghosyan