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Effectiveness of the stabilization fiscal rule for resource-rich countries
https://doi.org/10.32609/0042-8736-2022-12-72-97
Abstract
This paper explores the efficacy of the fiscal rule enacted by regulators in exporting countries, which implies the smoothing of tax revenue from the sale of natural resources. Under “efficacy” we understand its stabilization effect that is lowering volatility (countercyclicality) of key macroeconomic variables following its imposition. The approach to the operation of the fiscal rule is based on two types of assumptions: those about the type of the fiscal rule and about the structure of the economy. The first ones take into account imperfections in the workings of the revenue smoothing mechanism; the second relate to the duration of price and wage contracts, the cost of investing in foreign assets, government demand structures, household habits and the share of Ricardian households. We use a DSGE model of a small open economy with a strong reliance on commodity exports. The paper analyzes the assumptions under which various modifications of the fiscal rule lose their efficiency in relation to inflation, output and the exchange rate. The study emphasizes the importance of accurate identifying of fiscal rule workings, as well as the need for correct measurement of economic indicators in order to determine the nature of the fiscal rule effect related to revenue smoothing. The conclusion is made regarding the effectiveness of the future fiscal rule in Russia in the absence of an external wealth fund and a closed financial account.
Keywords
DSGE,
fiscal rule,
inflation,
exchange rate pass-through,
business cycle,
fiscal policy,
terms of trade,
effectiveness
JEL: D58, E47, E62, E63
About the Author
M. Y. Andreyev
Bank of Russia;
Russian Presidential Academy of National Economy and Public Administration;
Moscow Institute of Physics and Technology (National Research University)
Russian Federation
Russian Federation
Mikhail Y. Andreyev
Moscow
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For citations:
Andreyev M.Y. Effectiveness of the stabilization fiscal rule for resource-rich countries. Voprosy Ekonomiki. 2022;(12):72-97. (In Russ.) https://doi.org/10.32609/0042-8736-2022-12-72-97
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