The Value of Fiscal Discipline for Oil-Exporting Countries

Posted: 21 Mar 2012

Date Written: March 1, 2012

Abstract

The value of fiscal discipline is assessed by analyzing the role of fiscal policy as a transmission mechanism of oil price shocks in oil-exporting small open economies. Fiscal policy is an important propagation channel. Taking policy as given by the data, the model can successfully explain the responses of key macroeconomic variables, but it is unable to explain these responses under counterfactual fiscal frameworks. Interestingly, fiscal policy also seems capable of regulating the size of pass-through. Furthermore, fiscal policies that insulate the economy from oil price shocks seem to be welfare improving over procyclical ones.

Keywords: Oil price shock, Transmission mechanism, Fiscal policy, Small open economy, Oil revenue

JEL Classification: E32, E62, F41, H30, Q33, Q43

Suggested Citation

Pieschacon, Anamaria, The Value of Fiscal Discipline for Oil-Exporting Countries (March 1, 2012). Journal of Monetary Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2026556

Anamaria Pieschacon (Contact Author)

Northwestern University - Kellogg School of Management - Department of Finance ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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