Commodity prices and fiscal policy design: Procyclical despite a rule

Hilde C. Bjørnland; Leif Anders Thorsrud

doi:10.1002/jae.2669

journal article Dec 04, 2018

Commodity prices and fiscal policy design: Procyclical despite a rule

Hilde C. Bjørnland Leif Anders Thorsrud

Journal of Applied Econometrics Vol. 34 No. 2 pp. 161-180 · Wiley

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Abstract

Summary
Recent studies offer evidence of reduced fiscal procyclicality to commodity price changes in resource‐rich countries—a feature commonly attributed to the adoption of fiscal policy rules. We revisit this issue and find that, by controlling for global activity shocks while allowing for time‐varying changes in both fiscal policy and the volatility of shocks, this finding does not hold. To show this we develop a time‐varying dynamic factor model, allowing for a multiple of shocks, stochastic volatility and time‐varying parameters, and estimate it on data for Norway, whose handling of resource wealth is often cited as exemplary.

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Details

Published: Dec 04, 2018
Vol/Issue: 34(2)
Pages: 161-180
License: View

Authors

H

Hilde C. Bjørnland

Centre for Applied Macro‐ and Petroleum Economics BI Norwegian Business School Oslo Norway

L

Leif Anders Thorsrud

Centre for Applied Macro‐ and Petroleum Economics BI Norwegian Business School Oslo Norway; Norges Bank Oslo Norway

Cite This Article

Hilde C. Bjørnland, Leif Anders Thorsrud (2018). Commodity prices and fiscal policy design: Procyclical despite a rule. Journal of Applied Econometrics, 34(2), 161-180. https://doi.org/10.1002/jae.2669

Commodity prices and fiscal policy design: Procyclical despite a rule

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