Boom-bust cycle, asymmetrical fiscal response and the Dutch disease /

Boom-bust cycle, asymmetrical fiscal response and the Dutch disease /

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Bibliographic Details
Author / Creator:	Arezki, Rabah, author.
Imprint:	[Washington, D.C.] : International Monetary Fund, ©2010.
Description:	1 online resource (33 pages) : illustrations
Language:	English
Series:	IMF working paper ; WP/10/94 IMF working paper ; WP/10/94.
Subject:	Petroleum industry and trade -- Econometric models. Business cycles -- Econometric models. Business cycles -- Econometric models. Petroleum industry and trade -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12499733

Hidden Bibliographic Details
Other authors / contributors:	Ismail, Kareem, author. International Monetary Fund, issuing body. IMF Institute, issuing body.
ISBN:	9781451982718 1451982712 1282845853 9781282845855 9781451982800 1451982801 9786612845857 6612845856 1452710694 9781452710693 1462390056 9781462390052
Notes:	Includes bibliographical references. English. Print version record.
Summary:	We examine the behavior of expenditure policy during boom-bust in commodity price cycles, and its implication for real exchange rate movements. To do so, we introduce a Dutch disease model with downward rigidities in government spending to revenue shock. This model leads to a decoupling between real exchange rate and commodity price movement during busts. We test our model's theoretical predictions and underlying assumptions using panel data for 32 oil-producing countries over the period 1992 to 2009. Results are threefold. First, we find that change in current spending have a stronger impact on the change in real exchange rate compared to capital spending. Second, we find that current spending is downwardly sticky, but increases in boom time, and conversely for capital spending. Third, we find limited evidence that fiscal rules have helped reduce the degree of responsiveness of current spending during booms. In contrast, we find evidence that fiscal rules are associated with a significant reduction in capital expenditure during busts while responsiveness to boosts is more muted. This raises concerns about potential adverse consequences of this asymmetry on economic performance in oil-producing countries.
Standard no.:	9781451982718

Description
Summary:	We examine the behavior of expenditure policy during boom-bust in commodity price cycles, and its implication for real exchange rate movements. To do so, we introduce a Dutch disease model with downward rigidities in government spending to revenue shock. This model leads to a decoupling between real exchange rate and commodity price movement during busts. We test our model's theoretical predictions and underlying assumptions using panel data for 32 oil-producing countries over the period 1992 to 2009. Results are threefold. First, we find that change in current spending have a stronger impact on the change in real exchange rate compared to capital spending. Second, we find that current spending is downwardly sticky, but increases in boom time, and conversely for capital spending. Third, we find limited evidence that fiscal rules have helped reduce the degree of responsiveness of current spending during booms. In contrast, we find evidence that fiscal rules are associated with a significant reduction in capital expenditure during busts while responsiveness to boosts is more muted. This raises concerns about potential adverse consequences of this asymmetry on economic performance in oil-producing countries.
Physical Description:	1 online resource (33 pages) : illustrations
Bibliography:	Includes bibliographical references.
ISBN:	9781451982718 1451982712 1282845853 9781282845855 9781451982800 1451982801 9786612845857 6612845856 1452710694 9781452710693 1462390056 9781462390052