Fiscal Policy Regimes in Resource-Rich Economies

Hilde C. Bjørnland (), Roberto Casarin, Marco Lorusso and Francesco Ravazzolo ()
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland () and Leif Anders Thorsrud

No No 13/2023, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: We analyse fiscal policy in resource-rich economies using a novel Bayesian regime-switching panel model. The identified regimes capture pro- or countercyclical fiscal behaviour, while the switches between the regimes have the interpretation of changes in fiscal policy. Applying the model to sixteen oil-producing economies, we show that fiscal policy has alternated between a procyclical and countercyclical regime multiple times over the sample. Furthermore, we find fiscal policy to be more volatile in the procyclical regime and that the probability of being in the procyclical regime is higher for OPEC countries rather than non-OPEC countries. We also show that following either an increase or decrease in oil revenues, the growth in government expenditure mostly increases, suggesting there is an upward bias in expenditures in oil-producing countries. These are new findings in the literature.

Pages: 42 pages
Date: 2023-10
New Economics Papers: this item is included in nep-ban, nep-cmp, nep-fdg and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0125

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