Boom–bust cycle, asymmetrical fiscal response and the Dutch disease

Arezki, Rabah; Ismail, Kareem

doi:10.1016/j.jdeveco.2012.11.007

Cited by 80 publications

(55 citation statements)

References 10 publications

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“…Among the common findings in various other countries are positive effects of oil revenues on government consumption expenditures, the government wage bill, fuel and housing subsidies and military spending, and negative effects on the non-oil economy. Arezki and Ismail (2013) and El Anshasy and Bradley (2012) on a larger number of oil exporting countries). Many of these studies identify the ability to deal with volatility in their government revenues as a major weakness of oil rich developing countries.…”

Section: Literature Reviewmentioning

confidence: 97%

Management of Oil Revenues: Has That of Azerbaijan Been Prudent?

2017

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Abstract:To help explain the common failure of oil or other natural resource exporting countries to diversify into industry, it has been common to trace this failure to real exchange rate appreciation. This has also been done in Azerbaijan. However, because Azerbaijan has devoted so much of its oil revenues to government investment, Azerbaijan provides a suitable case for examining an alternative link through government investment. This study applies the ARDL cointegration method to quarterly time series data on oil prices, government capital formation, non-oil exports and non-oil GDP to estimate the long run relationships linking oil prices to government investment expenditures and further to generation of non-oil GDP. The results show that despite the massive government investment expenditures, extremely little non-oil production of the tradable type has been generated, calling attention to the need for policy reform.

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Section: Literature Reviewmentioning

confidence: 97%

Management of Oil Revenues: Has That of Azerbaijan Been Prudent?

2017

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“…Also, we check whether removing groups of countries affects the robustness of the effect of giant oil discoveries on the current account. Given the relative concentration of giant oil discoveries in certain Middle East and North African countries, we tried removing all countries belonging to 36 See for instance Arezki and Ismail (2013) and references therein for a discussion of the empirical literature on the Dutch Disease. Arezki and al.…”

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confidence: 99%

News Shocks in Open Economies: Evidence from Giant Oil Discoveries

Arezki

Ramey

Sheng

2015

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This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output ̶ the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not increase until after 5 years. Employment rates fall slightly for a sustained period of time.JEL Classification: E00, F3, F4.

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“…2 However, once the world prices for exported commodity goods drop, most governments find it difficult to reverse their current expenditure (e.g., subsidies and wages) and rely more on cutting capital expenditure. In a panel study of 32 oil-producing countries over the 1992-2009 period, Arezki and Ismail (2012) found that current government spending increases in boom times, but is downward-sticky. Furthermore, the volatility of total spending is over 60 percent higher in resource-rich countries than in their non-resource counterparts (Ghura and Pattillo et al 2012).…”

Section: Related Literaturementioning

confidence: 99%

Price volatility and the political economy of resource-rich nations

Mahmud

Basher

2014

Econ Gov

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This paper attempts to understand how price volatility affects the political transition of a resource-rich nation. Two states reflect price volatility: 'high prices' and 'low prices'. We argue that whether or not political transition (i.e., a switch from one regime to another) will take place in a particular state depends critically on the kind of goods a country produces.If the main economic activity in a country is the extraction of "point-source" resources such as oil that demands capital-intensive production, the opportunity cost of switching the existing regime does not alter if the price of the resource changes but the benefit becomes more lucrative. Therefore, the incumbent group is most vulnerable during 'high prices'.If the main economic activity of the nations is the production of "diffused resources" that requires labor such as coffee, prices do affect the opportunity cost. Nations concentrating in these commodities, face acute political crisis during downturns. JEL Codes: O13.Keywords: Price volatility; Natural resources; Political systems. * We are grateful to two anonymous referees for their valuable suggestions. We thank Megan Foster for her help with proofreading. The views expressed here are authors' own and do not necessarily reflect those of the affiliated institutions.

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Boom–bust cycle, asymmetrical fiscal response and the Dutch disease

Cited by 80 publications

References 10 publications

Management of Oil Revenues: Has That of Azerbaijan Been Prudent?

Management of Oil Revenues: Has That of Azerbaijan Been Prudent?

News Shocks in Open Economies: Evidence from Giant Oil Discoveries

Price volatility and the political economy of resource-rich nations

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