The impact of oil price fluctuations on fiscal discipline in selected rentier economies

A Thesis submitted by

Basheer D. Hamzah

To The Council of Administration and Economic College

University of Karbala

As Partial Fulfillment of the Requirements For The

Degree of Master of Science in Economics

Supervision by:-

Assistant Professor Dr.

 Muhammad Naji Muhammad

      The research deals with the study of the impact of oil price fluctuations on financial discipline through the impact of these fluctuations on the financial rules of discipline in the selected rentier economies (Iraq and Algeria) represented by the rules of revenues, expenditures, deficit, debt and the golden rule in order to find solutions to the research problem represented by the dependence of rentier economies on a single, depleted source To finance the general budget, which is oil revenues, and that every fluctuation in oil prices is directly reflected on the general budget and thus affects development plans and the contraction of economic activity due to the reduction of government spending that depends on oil revenues, and the result is the government’s resort to public debt to fill the deficit.

The importance of the research lies in the fact that achieving the policy of financial discipline for rentier economies in accordance with the safe ratios specified under the Maastricht Treaty avoids the occurrence of imbalances in the structure of the economy and mitigates the negative effects of fluctuating oil prices on these economies, so the study aims to control public spending according to available revenues to eliminate or reduce deficit rates Within or less than (3%) of the GDP in order not to resort to borrowing and to increase the public debt ratio over the permissible limit (60%) of the GDP. Modern standard models (ARDL) to estimate these series and indicate the nature of the relationship between the study variables according to the statistical program (E-views10).

The main conclusion of the study is that there is an overrun of the safe ratios in all the rules of the selected economies, but there was financial discipline according to the specific ratios for separate years, except for the two rules of public debt and gold in the Algerian economy, they achieved discipline throughout the study period, The main recommendation of the study was to follow more measures of financial discipline in fiscal policy by controlling spending within the limits of revenues, diversifying sources of income, not relying on a single volatile and depleted source, and establishing sovereign funds to benefit from financial savings in times of recovery and high oil prices, and using them in years of low oil prices. Financing the deficit and development plans and ensuring their sustainability.            

The impact of oil price fluctuations on fiscal discipline in selected rentier economies

A Thesis submitted by

Basheer D. Hamzah

To The Council of Administration and Economic College

University of Karbala

As Partial Fulfillment of the Requirements For The

Degree of Master of Science in Economics

Supervision by:-

Assistant Professor Dr.

 Muhammad Naji Muhammad

      The research deals with the study of the impact of oil price fluctuations on financial discipline through the impact of these fluctuations on the financial rules of discipline in the selected rentier economies (Iraq and Algeria) represented by the rules of revenues, expenditures, deficit, debt and the golden rule in order to find solutions to the research problem represented by the dependence of rentier economies on a single, depleted source To finance the general budget, which is oil revenues, and that every fluctuation in oil prices is directly reflected on the general budget and thus affects development plans and the contraction of economic activity due to the reduction of government spending that depends on oil revenues, and the result is the government’s resort to public debt to fill the deficit.

The importance of the research lies in the fact that achieving the policy of financial discipline for rentier economies in accordance with the safe ratios specified under the Maastricht Treaty avoids the occurrence of imbalances in the structure of the economy and mitigates the negative effects of fluctuating oil prices on these economies, so the study aims to control public spending according to available revenues to eliminate or reduce deficit rates Within or less than (3%) of the GDP in order not to resort to borrowing and to increase the public debt ratio over the permissible limit (60%) of the GDP. Modern standard models (ARDL) to estimate these series and indicate the nature of the relationship between the study variables according to the statistical program (E-views10).

The main conclusion of the study is that there is an overrun of the safe ratios in all the rules of the selected economies, but there was financial discipline according to the specific ratios for separate years, except for the two rules of public debt and gold in the Algerian economy, they achieved discipline throughout the study period, The main recommendation of the study was to follow more measures of financial discipline in fiscal policy by controlling spending within the limits of revenues, diversifying sources of income, not relying on a single volatile and depleted source, and establishing sovereign funds to benefit from financial savings in times of recovery and high oil prices, and using them in years of low oil prices. Financing the deficit and development plans and ensuring their sustainability.