Commodity Price Shocks and Fiscal Outcomes

Samaké, Issouf; Spatafora, Nikola

doi:10.5089/9781475503333.001

Cited by 13 publications

(10 citation statements)

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“…The issue of fiscal sustainability has received increasing attention in Caribbean countries following the 2008-2009 global financial crisis and the more recent commodity price shocks of 2014-2015. These exogeneous shocks, combined with natural hazards such as tropical storms and floods, inadequate policy responses, and limited institutional arrangements to guide corrective measures, have contributed to persistent budgetary imbalances leading to increasing debt ratios in some Caribbean countries (see Acevedo, Cebotari, and Turner-Jones, 2013;Alleyne, Ötker, Ramakrishnan, and Srinivasan, 2017;Fajgenbaum and Loser, 2018;Samaké and Spatafora, 2012;Villafuerte, Lopez-Murphy, and Ossowski, 2010;Koetsier, 2017;Medina, 2010;Ramirez and Wright, 2017). The majority of Caribbean countries have relatively high debt ratios: the simple average of the general government debt-to-GDP ratio for the Caribbean increased from 66.4 percent in 2008 to 76.6 percent in 2017, ranging from 42 percent to 157 percent for countries in the region.…”

Section: Introductionmentioning

confidence: 99%

Fiscal Sustainability in the Caribbean: An Econometric Analysis

Khadan¹

2019

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Section: Introductionmentioning

confidence: 99%

Fiscal Sustainability in the Caribbean: An Econometric Analysis

Khadan¹

2019

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“…It is commonly accepted that countries with a considerable state size are highly dependent on natural resources (Spatafora and Samake, 2012;Cespedes and Velasco, 2014;Bova et al, 2016). As a result, these countries tend to show poor performance in terms of the quality of governance.…”

Section: Trends In Public Expenditures and Natural Resourcementioning

confidence: 99%

“…Dependence on natural resources can make it difficult to manage fiscal policy, 1 Central African economic and monetary community (Appendix 1). increasing fiscal uncertainty and encouraging suboptimal fiscal policy (Spatafora and Samake, 2012). Indeed, countries that are highly dependent on natural resources, such as CEMAC countries, are vulnerable to major and persistent shocks due to the volatility of commodity prices.…”

Section: Introductionmentioning

confidence: 99%

“…With respect to work in developing countries, the procyclical orientation of fiscal policies has been proven much more in relation to GDP (Bova et al, 2016;Calderon and Nguyen, 2016;Lim, 2020) than in relation to commodity prices (Spatafora and Samake, 2012;Cespedes and Velasco, 2014;Bova et al, 2016;da Costa Antonio and Rodriguez-Gil, 2020). Additionally, the evidence that institutions in developing countries can undermine the procyclical orientation of fiscal policy is still insufficient and unclear (El Anshasy & Bradley, 2012;Koh, 2017;da Costa Antonio and Rodriguez-Gil, 2020;Bergman and Hutchison, 2020).…”

Section: Introductionmentioning

confidence: 99%

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Natural Resources and Fiscal Policy in CEMAC: The Role of Institutional Quality

Bouanza¹,

Ngassa²

2021

TEL

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This article aims to analyze the effects of institutional quality through natural resource rents on the orientation of fiscal policy in the Central African Economic and Monetary Community (CEMAC). The methodology adopted for this purpose is based on panel data (over the 1996-2016 period) and the GMM system estimator. The results show that natural resource rents are a means by which institutional quality affects the orientation of fiscal policy. Indeed, economic and institutional governance complements natural resource rents in the countercyclical orientation of total public spending. Thus, there is an absence of the indirect effects of institutional quality on the orientation of total public revenue behavior. Similarly, during natural resource booms, the orientation of total public spending remains countercyclical. Thus, political and institutional governance reinforces the effects of natural resource booms on the countercyclical orientation of total public spending. With regard to the decline in natural resource rents, total public spending remains countercyclical. Only institutional governance reinforces the effects of the decline in natural resource rents on the countercyclical nature of total public spending. Thus, the procyclical orientation of the behavior of total public revenue remains, regardless of whether there are periods of boom or collapse in natural resource rents. Political governance amplifies the effects of the decline in natural resource rents on the procyclical behavior of total public revenue. These results lead to economic policy implications.

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“…The issue of fiscal sustainability has received increasing attention in Caribbean countries following the 2008-2009 global financial crisis and the more recent commodity price shocks of 2014-2015. These exogeneous shocks combined with natural hazards such as tropical storms and floods, inadequate policy responses and limited institutional arrangements to guide corrective measures have contributed to persistent budgetary imbalances leading to increasing debt ratios in some Caribbean countries (see Acevedo, Cebotari, and Turner-Jones, 2013;Alleyne, Ötker, Ramakrishnan, and Srinivasan, 2017;Fajgenbaum and Loser, 2018;Samaké and Spatafora, 2012;Villafuerte, Lopez-Murphy, and Ossowski, 2010;Koetsier, 2017;Medina, 2010;Ramirez and Wright, 2017). The majority of countries have debt ratios that are above the negative debt-growth threshold of 60 percent of GDP as suggested by Greenidge et al (2012): the simple average of the general government debt to GDP ratio for the Caribbean increased from 66.4 percent in 2008 to 76.6 percent in 2017, ranging from 42 percent to 157 percent for countries in the region.…”

Section: Introductionmentioning

confidence: 99%

Fiscal Sustainability in the Caribbean: An Econometric Analysis

Khadan

2019

RAE

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Many countries in the Caribbean have been grappling with persistent fiscal imbalances and rising debt levels. The average debt to GDP ratio in the Caribbean in 2017 was 76.6 percent, higher than the negative debt-growth threshold of 60 percent of GDP. Also, the average fiscal deficit as a percent of GDP was 2.8 percent, but with significant heterogeneity across countries ranging from 0.5 percent to 11 percent. Using the inter-temporal budget constraint framework and various panel data econometric estimators, this article examines the issue of fiscal sustainability for a group of 10 Caribbean countries over the period 1991-2017. The evidence from panel cointegration models of government revenue and expenditure shows that past fiscal behavior is “weakly” sustainable. The “weak sustainability” finding is reinforced by evidence from an extended fiscal reaction function which showed that the primary balance improves by about 0.02 for every 1 percentage point increase in the debt ratio.

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Commodity Price Shocks and Fiscal Outcomes

Cited by 13 publications

References 10 publications

Fiscal Sustainability in the Caribbean: An Econometric Analysis

Fiscal Sustainability in the Caribbean: An Econometric Analysis

Natural Resources and Fiscal Policy in CEMAC: The Role of Institutional Quality

Fiscal Sustainability in the Caribbean: An Econometric Analysis

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