• norsk
    • English
  • English 
    • norsk
    • English
  • Login
View Item 
  •   Home
  • Handelshøyskolen BI
  • BI Research Centre's Series
  • Centre for Applied Macro- and Petroleum economics (CAMP)
  • View Item
  •   Home
  • Handelshøyskolen BI
  • BI Research Centre's Series
  • Centre for Applied Macro- and Petroleum economics (CAMP)
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Commodity prices and fiscal policy design: Procyclical despite a rule

Bjørnland, Hilde C.; Thorsrud, Leif Anders
Working paper
Thumbnail
View/Open
working_camp_5-2015.pdf (10.39Mb)
URI
http://hdl.handle.net/11250/2364950
Date
2015
Metadata
Show full item record
Collections
  • Centre for Applied Macro- and Petroleum economics (CAMP) [104]
Abstract
We analyse if the adoption of a fiscal spending rule insulates the domestic economy from commodity price fluctuations in a resource-rich economy. To do so we develop a time-varying Dynamic Factor Model, in which we allow both the volatility of structural shocks and the systematic fiscal policy responses to change over time. We focus on Norway, a country that is put forward as exemplary with its handling of resource wealth. Unlike most oil exporters, Norway has devised a fiscal frame- work with the view to shield the domestic economy from oil price fluctuations. By transferring its petroleum revenues to a sovereign wealth fund, and then consuming only the expected real return on the fund, fiscal policy allows for a gradual phasing in of the petroleum revenue, unrelated to movements in oil prices.

We find that, contrary to common perception, fiscal policy has been more (not less) procyclical with commodity prices since the adoption of the fiscal rule in 2001. Fiscal policy has thereby worked to exacerbate the commodity price fluctuations on the domestic economy. Large inflows of money to the fund during a period of rapidly increasing oil prices is part of the explanation. Still, Norway has managed to save a large share of its petroleum income for future generations. Compared to many other resource-rich economies practising a more spend-as-you-go strategy, this is a great success.
Publisher
BI Norwegian Business School
Series
CAMP Working Paper Series;5/2015

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit
 

 

Browse

ArchiveCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsDocument TypesJournalsThis CollectionBy Issue DateAuthorsTitlesSubjectsDocument TypesJournals

My Account

Login

Statistics

View Usage Statistics

Contact Us | Send Feedback

Privacy policy
DSpace software copyright © 2002-2019  DuraSpace

Service from  Unit