Fiscal Reaction function of Government into Oil Price Shocks

Document Type : Research Paper

Authors

1 Associate Professor, Department of Economics, Faculty of Social and Economic Sciences, Alzahra University, Tehran, Iran

2 Master's student, Department of Economics, Faculty of Social and Economic Sciences, Alzahra University, Tehran, Iran

Abstract

According to state of the economy and single product much government spending is financed from oil revenues. Since the changes in oil prices stems from exogenous developments and economic authorities outside of the control of oil revenues is also a great deal of volatility. These fluctuations can have a variety of consequences.
In a dynamic general equilibrium framework, this paper attempts to drive a fiscal policy reaction function (in term of government expenditure). The data are analyzed in this study - which is for the period 1969-2018 and annual basis. I study the fiscal implications of (a) the anticipated change oil price, (b) the growing volatility of oil price, (c) the observed positively skewed oil price. The result show that a robust positive long run effect of favorable oil price shocks. Also, the asymmetry of oil price shocks is to reduce the growth of government spending.
The most important policy advice of this article is that policymakers, using the successful experiences of other oil countries, to establish an institution such as a savings and investment fund, to prevent direct shocks to the domestic economy and the negative effects of oil price instability. Reduce GDP and government revenues.

Keywords

References

  •  

    • اسماعیل نیا، علی اصغر؛پازوکی، آزاده؛ پازوکی، محمدرضا و کریمی، مجتبی. (1391). تبیین و تحلیل اثرات شوک های نفتی بر رفتار مخارج دولت در اقتصاد ایران، اقتصاد مالی (اقتصاد مالی و توسعه)، 6 (20): 93-126.
    • ایزدخواستی، حجت. (1397). بررسی پویای درآمدهای نفتی بر رفتار دولت در تخصیص هزینه­های مصرفی به امور اجتماعی، اقتصادی، عمومی و دفاعی در ایران. فصلنامه سیاستهای راهبردی و کلان، 6(21): 50-25
    • صمدی امین آبادی، وحید. (1378). تجزیه و تحلیل اثرات شوکهای نفتی بر متغیرهای کلان اقتصاد. پایان نامه کارشناسی ارشد، دانشگاه شیراز.
    • صمدی، سعید؛ یحیی آبادی، ابوالفضل و معلمی، نوشین. (1388). تحلیل تأثیرشوک­های نفتی بر متغیرهای اقتصاد کلان ایران. فصلنامه پژوهش و سیاست­های اقتصادی، 17(52): 26-5.
    • کیان پور، سعید. (1390). سیاست مالی دولت و چگونگی مصرف درآمدهای نفتی. ماهنامه اطلاعات سیاسی- اقتصادی، 284: 187-168 .
    • متوسلی، محمود؛ ابراهیمی، ایلناز؛ کمیجانی، اکبر و شاهمرادی، اصغر. (1389). طراحی یک مدل تعادل عمومی پویای تصادفی برای یک اقتصاد صادرکننده نفت. فصلنامه پژوهش­های اقتصادی، 10(4): 116-87.
    • متین، شهاب و احمدی شادمهر، محمدطاهر. (1394). بررسی آثار نامتقارن نوسانات قیمت نفت بر ترکیب مخارج دولت در ایران: کاربرد تعریف مورک و همیلتون. دو فصلنامه اقتصاد پولی و مالی، 22(10): 58-22.
    • محمدی، حسین و براتزاده، امین. (1392). تأثیر شوکهای حاصل از کاهش درآمد نفت بر مخارج دولت و نقدینگی در ایران. فصلنامه اقتصاد انرژی، 2(7): 145-129.

     

    • Barnett, S., & Ossowski, R. (2002). Operational aspects of policy in oil-producing countries. Working Paper No. 02/177, International Monetary Fund.
    • Bohn, H. (1995). The sustainability of budget deficits in a stochastic economy. Journal of Money, Credit and Banking, 27(1), 257-271.
    • Cologni, A., & Manera, M. (2013). Exogenous oil shocks, fiscal policies and sector reallocations in oil producing countries. Energy Economics, 35, 42-57.
    • Dehn, J. (2001). The effects on growth of commodity price uncertainty and shocks(Vol. 2455). World Bank Publications.
    • El Anshasy, A. A., & Bradley, M. D. (2012). Oil prices and the fiscal policy response in oil-exporting countries. Journal of Policy Modeling, 34(5), 605-620.
    • El Anshasy, A. A., Bradley, M. D., & Joutz, F. L. (2006). Oil prices, fiscal policy and Venezuela’s economic growth (Technical report). Department of Economics the George Washington University, Washington, DC. http: www.be.wvu.edu/div/econ/
    • Esmaeilnia, A. A., Pazoki, A., Pazoki, M. R., & Karimi, M. (2012). Explaining and analyzing the effects of oil shocks on the behavior of government spending in Iran's economy. Financial Economics, 6(20), 93-126 (in Persian).
    • Farzanegan, M. R. (2011). Oil revenue shocks and government spending behavior in Iran. Energy Economics, 33(6), 1055-1069.
    • Farzanegan, M. R., & Markwardt, G. (2007). The effects of oil price shocks on the Iranian economy. Energy Economics, 31(1), 134-151.
    • Izadkhasti, H. (2018). Dynamic effects of oil revenues on the government behavior in the allocation of consumption expenditure on public and defense affairs. Quarterly Journal of the Macro and Strategic Policies, 6(21), 140-160 (in Persian).
    • Kianpour, S. (2011). Government financial policy and how to use oil revenues. Political & Economic Ettelaat, 284, 168-187 (in Persian).
    • Lederman, D., & Maloney, W. F. (eds). (2007). Natural Resources: Neither Curse nor Destiny. Washington, DC: World Bank; and Stanford, CA: Stanford University
    • Matin, S., Ahmadi Shadmehri, M. T., & falahi, M. A. (2015). An investigation of the asymmetric effects of oil price fluctuations on the composition of the government's expenditures in Iran (The application of Mork and Hamilton Definitions). Monetary & Financial Economics, 22(10), 22-58 (in Persian).
    • Mohammadi, H., & Baratzadeh, A. (2013). The Effect of Oil Revenue Shocks on Government Expenditure and Liquidity in Iran Economy. Iranian Energy Economics, 2(7), 129-145 (in Persian).
    • Motavaseli, M., Ebrahimi, I., Shahmoradi, A., & Komijani, A. A. (2011). New Keynesian dynamic stochastic general equilibrium (DSGE) model for an oil exporting country. QJER, 10(4), 87-116 (in Persian).
    • Rodrik, D. (1998). Why do more open economies have bigger governments?. Journal of Political Economy, 106(5), 997-1032.
    • Samadi Aminabadi, V. (1999). Analysis of the effects of oil shocks on macroeconomic variable. Master thesis, Shiraz University (in Persian).
    • Samadi, S., Yahyaabadi, A., & Moallemi, N. (2009). Analysis of the impact of oil shocks on the macroeconomic variables of Iran. Journal of Economic Research and Policies, 17(52), 5-26 (in Persian).
Iranian Economic Development Analyses
Volume 8, Issue 2 - Serial Number 22
October 2022
Pages 209-230

Files

Share

How to cite

Statistics