Good policy or good luck? Analyzing the effects of fiscal policy and oil revenue shocks in Ecuador

Freddy García-Albán, Manuel González-Astudillo and Cristhian Vera-Avellán

Energy Economics, 2021, vol. 100, issue C

Abstract: This paper proposes a framework to estimate the effects of exogenous fiscal policy and oil revenue shocks on the macroeconomic activity of price-taking oil producers. We use a structural vector autoregressive model estimated with Bayesian methods and apply it to the Ecuadorian economy. Specifically, we investigate the effects of unanticipated changes in taxes, government consumption spending, government investment spending, and oil revenues on economic activity. The results show that unanticipated expansive fiscal policy either through taxes or government investment can have positive effects on output. However, contrary to most studies in the literature, consumption spending shocks do not significantly affect gross domestic product. We also find that oil revenue shocks influence all the variables in the model, evidencing the vulnerability of the Ecuadorian economy to fluctuations of oil revenues. Historically, oil revenue shocks have been the most important driving force to move output above or below trend.

Keywords: Fiscal policy; Fiscal multipliers; Oil revenues; Structural VAR; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C32 E32 E62 Q33 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988321002279
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002279

DOI: 10.1016/j.eneco.2021.105321

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().