When the Cycle Becomes the Trend : The Emerging Market Experience with Fiscal Policy during the Last Commodity Super Cycle
Fiscal buffers have shrunk across the world. This paper argues that limited fiscal room in emerging market economies today is partly due to the commodity super cycle of 2000-15. The super cycle created the mirage that economic performance had struc...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/355881547823983112/When-the-Cycle-Becomes-the-Trend-The-Emerging-Market-Experience-with-Fiscal-Policy-during-the-Last-Commodity-Super-Cycle http://hdl.handle.net/10986/31180 |
| Summary: | Fiscal buffers have shrunk across the
world. This paper argues that limited fiscal room in
emerging market economies today is partly due to the
commodity super cycle of 2000-15. The super cycle created
the mirage that economic performance had structurally
improved, mistaking a long, commodity-fueled uptick in the
business cycle for higher trend growth. This thinking
supported fiscal expansions. When the commodity boom ended,
it became apparent that countries had saved less than they
should have, and that fiscal policy had, perhaps
inadvertently, been pro-cyclical. It left countries with
depleted fiscal buffers and large budgets when the cycle
came to an end, limiting room for fiscal stimulus when
needed. The paper illustrates the argument with reference to
the South African experience. |
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