# 11-068/2 (2011-04-15; 2011-05-16)

Sweder van Wijnbergen, University of Amsterdam; Nina Budina, IMF
volatility, oil wealth, fiscal sustainability
JEL codes:
E21, E27

This discussion paper resulted in a publication in the 'Economics of Transition', 2011, 19(4), 639-666.

Whether fiscal policy is sustainable depends on a government'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.