Fiscal Policy in Oil and Gas-Exporting Economies: Good Times, Bad Times and Ugly Times

Olivier Durand-Lasserve and Fatih Karanfil
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Fatih Karanfil: King Abdullah Petroleum Studies and Research Center

Discussion Papers from King Abdullah Petroleum Studies and Research Center

Abstract: Revenues from oil and gas exports represent an important source of government budgets in some emerging countries. At the same time, these revenues fluctuate considerably due to changing global economic conditions and energy prices. Economic theory prescribes that governments should try to stabilize their economies by saving windfall oil and gas revenues and spending them in periods of price downturns. However, oil- and gas-exporting countries often run procyclical policies, that is, they increase spending during windfall periods and reduce it in the event of a shortfall, which may result in severe recessions. Understanding what drives the response of fiscal policy to oil and gas revenue shocks is important as it helps to explain what makes the economies of commodity exporters more or less vulnerable to commodity price shocks, and how they can adjust to price volatility and to the long-term energy transition.

Pages: 35
Date: 2023-04-07
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https://www.kapsarc.org/research/publications/fisc ... imes-and-ugly-times/ First version, 2023

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Persistent link: https://EconPapers.repec.org/RePEc:prc:dpaper:ks--2023-dp11

DOI: 10.30573/KS--2023-DP11

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