Was this time different?: Fiscal policy in commodity republics

Céspedes, Luis Felipe; Velasco, Andrés

doi:10.1016/j.jdeveco.2013.07.012

Cited by 96 publications

(80 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…For example, Frankel, Végh and Vuletin (2012) show that institutional frameworks characterized by the protection of property rights, the control of corruption, higher bureaucratic quality, and a strong law and order tradition have allowed developing countries to "graduate" from procyclicality in the past decade. Using alternative proxies for institutional quality, Céspedes and Velasco (2014) find evidence consistent with Frankel et al (2012) in a sample of 60 resource-rich countries, and Alesina, Campante and Tabellini (2008) show that measures of corruption are positively correlated with procyclical fiscal policy.…”

Section: Literature Review: Economics Institutions and Political Inmentioning

confidence: 76%

See 1 more Smart Citation

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Ardanaz¹,

Izquierdo²

2017

View full text Add to dashboard Cite

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 Abstract * This paper studies the cyclical properties of two key expenditure categories (current and public investment spending) during the different phases of the business cycle (good times and bad times). Anecdotal evidence suggests that policymakers usually cannot resist the temptation of spending more on current expenditure in good times, but only pick capital expenditures to adjust during bad times. The paper answers the following questions: do current and capital expenditures react to the business cycle? If so, by how much, and why? In a sample of more than 100 developing countries and 30 developed countries observed between 1980 and 2014, a new empirical regularity specific to developing countries is identified: upswings are associated with increases in current primary expenditures (e.g., wages, transfers) only, while public investment falls and current spending remains acyclical during downturns. Evidence is also presented that this asymmetrical response is more pronounced in countries where incumbent politicians face shorter time horizons and weak institutions. Other type of factors traditionally discussed in the literature (limited creditworthiness, fiscal rules, and tax base volatility) have limited explanatory power. JEL classifications: D72, E32, E62, H50

show abstract

Section: Literature Review: Economics Institutions and Political Inmentioning

confidence: 76%

“…See Medina (2016) for evidence across Latin America and Céspedes and Velasco (2014) across a broader sample of commodity exporting countries. In this paper, we control for the change in the terms of trade across all of our specifications (with the exception of Table 1).…”

mentioning

confidence: 99%

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Ardanaz¹,

Izquierdo²

2017

View full text Add to dashboard Cite

show abstract

“…The remaining two driving forces are the world's foreign demand and the country-specific technology which we characterize as AR(1) processes 20,21 ln…”

Section: Other Driving Forcesmentioning

confidence: 99%

“…20 Strictly speaking, the processes for R * and Y * can also be considered two additional common factors. We prefer not to label them as such because they will be considered observable processes in the estimation of the model, unlike f Co which will be treated as a latent variable.…”

Section: Equilibriummentioning

confidence: 99%

Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies

2015

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed. Terms of use: Documents inAny dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2015 Abstract * Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). This paper documents how these fluctuations correlate strongly with the business cycle in EMEs. A commodity sector is then embedded into a multi-country EMEs business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces. The estimated model assigns to commodity shocks 42 percent of the variance in income, of which a considerable part is linked to the common factor. A further amplification mechanism is a spillover effect from commodity prices to risk premia. JEL classifications: E32, F41, F44

show abstract

“…1 Global commodity price volatility has often translated into domestic macroeconomic instability, especially in resource-rich developing countries where exports and government revenues are highly concentrated. This volatility has often been related to the procyclical response of fiscal policy to commodity price movements (Céspedes and Velasco (2014)). At the same time, large and sustained inflows of foreign exchange associated with resource windfalls have led to Dutch disease effects, that is, a contraction of domestic production of nonresource traded goods resulting from increased demand for nontraded goods and a real exchange rate appreciation.…”

Section: Introductionmentioning

confidence: 99%

Optimal fiscal management of commodity price shocks

Agénor

2016

Journal of Development Economics

View full text Add to dashboard Cite

A dynamic stochastic general equilibrium model is used to study the optimal fiscal response to commodity price shocks in a small open low-income country. The model accounts for imperfect access to world capital markets and a variety of externalities associated with public infrastructure, including utility benefits, a direct complementarity effect with private investment, and reduced distribution costs. However, public capital is also subject to congestion and absorption constraints, with the latter affecting the efficiency of infrastructure investment. The model is parameterized and used to examine the transmission process of a temporary resource price shock under a benchmark case (cash transfers) and alternative fiscal rules, involving either higher public spending or accumulation in a sovereign fund. The optimal allocation rule between spending today and asset accumulation is determined so as to minimize a social loss function defined in terms of the volatility, relative to the benchmark case, of private consumption and either the nonresource primary fiscal balance or a more general index of macroeconomic stability, which accounts for the volatility of the real exchange rate. Sensitivity analysis is conducted with respect to various structural parameters and model specification.

show abstract

Was this time different?: Fiscal policy in commodity republics

Cited by 96 publications

References 26 publications

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies

Optimal fiscal management of commodity price shocks

Contact Info

Product

Resources

About

Was this time different?: Fiscal policy in commodity republics

Cited by 96 publications

References 26 publications

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries ﻿

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries ﻿

Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies

Optimal fiscal management of commodity price shocks

Contact Info

Product

Resources

About

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries