Working Paper: NBER ID: w19748
Authors: Luis Felipe Céspedes; Andrés Velasco
Abstract: We revisit the issue of fiscal procyclicality in commodity-rich nations -commodity republics in the nomenclature of this paper. Since commodity prices are plausibly a main driver of fiscal policy outcomes in these countries, we focus on the behavior of fiscal variables across the commodity cycle, in contrast to behavior across the output cycle, which has been the main focus of earlier research on fiscal procyclicality. We present evidence of reduced fiscal policy procyclicality in a number of countries. Our empirical results suggest that improvements in institutional quality have led to a more countercyclical fiscal policy stance in a number of countries. The presence of fiscal rules also seems to have made a difference: countries that use them displayed a larger shift toward fiscal counter-cyclicality between the two episodes.
Keywords: No keywords provided
JEL Codes: E62; F21; F32; F41; H12; H6; H63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| improvements in institutional quality (O17) | countercyclical fiscal policy stance (E62) |
| presence of fiscal rules (E62) | countercyclical fiscal policy stance (E62) |
| improvements in institutional quality (O17) | enhanced fiscal management in response to commodity price fluctuations (E63) |
| presence of fiscal rules (E62) | larger shift toward fiscal countercyclicality (E62) |