Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules

Sweder van Wijnbergen and Nina Budina

No 11-068/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

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.

Keywords: volatility; oil wealth; fiscal sustainability (search for similar items in EconPapers)
JEL-codes: E21 E27 (search for similar items in EconPapers)
Date: 2011-04-15, Revised 2011-05-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20110068

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