Consumption smoothing and shock persistence : optimal simple fiscal rules for commodity exporters

الملخص EN

A commoncriticismofbalancedbudgetfiscalrulesisthattheyincreasetheconsump- tion volatilityoffinanciallyconstrainedhouseholdswhoareunabletosmoothconsumption.This paperevaluatesthewelfareconsequencesofsimplefiscalrulesinamodelofasmallcommodity- exportingcountrywithashareoffinanciallyconstrainedhouseholds,wherefiscalpolicytakesthe form oftransfers.Amainfindingisthatbalancedbudgetrulesforcommodityrevenuesoftenout- performmoresophisticatedfiscalruleswherecommodityrevenuesaresavedinaSovereignWealth Fund(SWF).Becausecommoditypriceshocksaretypicallyhighlypersistent,thehouseholds’cur- rentincomeisclosetotheirpermanentincome,makingbalancedbudgetrulesclosetooptimal.

Forcommoditieslikeoil,wherepriceshocksarehighlypersistent,itisoptimaltospendmorethan two-thirdsofwindfallrevenuesintimesofhighprices,andinsomecasesevenspendtheentire windfall.

Butforcommoditieswherepriceshocksarelesspersistent,likebananasorsugar,the optimal ruleinvolvesspendinglessthanhalfofabove-averagecommodityrevenues(withtherest savedinaSWF).Itisalsobesttorespondcounter-cyclicallytonon-resourceGDPshocks,because those shocksarelesspersistent(andalsoaffecthouseholds’otherincome).Thegovernmentdoes not havetheabilitytoperfectlysmoothconstrainedhouseholds’consumptionwithoutadversely affecting unconstrainedhouseholds