Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315916 
Year of Publication: 
2025
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-1638
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This research employs a quadratic exponential model to examine the dynamics of fiscal adjustments in the context of oil shocks. The findings suggest significant state dependence, with past fiscal adjustments increasing the likelihood of future adjustments and an asymmetry in oil shock effects. Supply shocks reduce the probability of fiscal adjustments, while demand shocks increase it. Furthermore, the impact of these shocks depends on several factors. Oil demand shocks positively impact fiscal adjustment even during downturns, providing a stabilizing effect. Net oil exporters are more affected by oil shocks than importers, experiencing more significant negative effects from supply shocks and more benefits from demand shocks. Fiscal institutions play a critical role in mitigating the volatility induced by oil shocks, with fiscal rules targeting primary or structural balances proving particularly effective.
Subjects: 
fiscal adjustment
oil shocks
fiscal rules
asymmetric effects
JEL: 
C25
E62
F41
H62
Q43
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Working Paper

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