van Wijnbergen, S. and Budina, N. (2011). Fiscal sustainability, volatility and oil wealth: a stochastic analysis of fiscal spending rules Economics of Transition, 19(4):639--666.
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Affiliated authorSweder van Wijnbergen
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Publication year2011
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JournalEconomics of Transition
Whether fiscal policy is sustainable depends on a government{\textquoteright}s future revenue and expenditure streams, both of which are highly uncertain. In commodity-rich countries, this problem is intensified by unpredictable and volatile commodity prices. We show how spending rules for oil income and non-oil primary deficits interact and influence the stochastic distribution of future debt stocks and demonstrate the variance reducing impact of feedback rules for primary deficits in a case study of oil-and-gas exporter Azerbaijan.