Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2011-04-15 Revision-Date: 2011-05-16 Number: 11-068/2 Author-Name: Sweder van Wijnbergen Author-Workplace-Name: University of Amsterdam Author-Name: Nina Budina Author-Workplace-Name: IMF Title: Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules 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. Classification-JEL: E21, E27 Keywords: volatility, oil wealth, fiscal sustainability File-Url: http://papers.tinbergen.nl/11068.pdf File-Format: application/pdf File-Size: 222254 bytes Handle: RePEc:tin:wpaper:20110068