 Cyclical fiscal rules for oil-exporting countriesEconomic Modelling, 2016, vol. 59, issue C, 473-483 Abstract: Budget-balance tax-gap rules are preferred to other fiscal policy rules to stabilize the macroeconomic volatility and welfare in oil-exporting countries. The output-inflation trade-off is of particular concern for oil exporters relative to non-oil commodity exporters due to the pass through of oil prices into headline inflation which warrants fiscal reaction to crude oil revenue. This result is robust to several instruments satisfying the rule but with reduced efficiency for those instruments that impact potential output such as government investment and capital taxes. These rules are desirable for fixed exchange rate regimes but are unable to achieve the same degree of stability as when coordinated with inflation-targeting monetary policy. Even under optimal inflation-targeting regimes, the adoption of budget-balance tax-gap rules can produce reductions in macroeconomic volatility and welfare gains. Keywords: Fiscal policy rules; Automatic stabilizers; Countercyclical fiscal policy; Macroeconomic policy; Oil price (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:59:y:2016:i:c:p:473-483 DOI: 10.1016/j.econmod.2016.08.009 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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