Measures of Fiscal Risk in Hydrocarbon-Exporting Countries

21 Pages Posted: 21 Nov 2012

See all articles by Carlos Caceres

Carlos Caceres

International Monetary Fund (IMF)

Leandro Medina

George Washington University - Department of Economics; International Monetary Fund (IMF) - Western Hemisphere Department

Multiple version iconThere are 2 versions of this paper

Date Written: October 2012

Abstract

The recent relatively high levels of global oil prices have led to a significant improvement in the public finances of several hydrocarbon-exporting countries. However, despite the increase in fiscal buffers, medium-term risks remain high. Fiscal vulnerabilities have increased as a consequence of the substantial spending packages that have been implemented in recent years. This has raised break-even prices — that is, the price levels that ensure that fiscal accounts are in balance at a given level of spending — in these countries. This study analyses such risks and develops measures of fiscal risk stemming from oil price fluctuations. An empirical application to hydrocarbon-exporting countries from the Middle East and North Africa region is included. Additionally, it is noted that countries with large net assets and proven oil reserves are much less vulnerable to fiscal risk than is indicated by standard measures based on break-even prices.

Keywords: fiscal risk, stochastic simulations, oil prices, volatility, break-even prices

JEL Classification: C53, G17, H60, Q38

Suggested Citation

Caceres, Carlos and Medina, Leandro, Measures of Fiscal Risk in Hydrocarbon-Exporting Countries (October 2012). IMF Working Paper No. 12/260, Available at SSRN: https://ssrn.com/abstract=2178511 or http://dx.doi.org/10.2139/ssrn.2178511

Carlos Caceres (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Leandro Medina

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States

International Monetary Fund (IMF) - Western Hemisphere Department

700 19th Street NW
Washington, DC 20431
United States

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