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

Tinbergen Discussion Paper No. 11-068/2

32 Pages Posted: 20 Apr 2011

See all articles by Sweder van Wijnbergen

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Nina Budina

World Bank

Date Written: April, 15 2011

Abstract

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

JEL Classification: E21, E27

Suggested Citation

van Wijnbergen, Sweder and Budina, Nina, Fiscal Sustainability, Volatility and Oil Wealth: A Stochastic Analysis of Fiscal Spending Rules (April, 15 2011). Tinbergen Discussion Paper No. 11-068/2. Available at SSRN: https://ssrn.com/abstract=1810606 or http://dx.doi.org/10.2139/ssrn.1810606

Sweder Van Wijnbergen (Contact Author)

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nina Budina

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
77
Abstract Views
493
rank
312,060
PlumX Metrics