Government Investment and the Business Cycle in Oil-Exporting Countries


I find that government investment can propagate oil price shocks and amplify macroeconomic fluctuations in oil-exporting countries. Structural vector autoregressions show an oil price shock has different effects in Mexico and Norway, oil-exporting countries featuring markedly different fiscal frameworks. In Mexico, an oil price shock generates an expansion of government investment and a boom in private economic activity. In Norway, the government does not increase investment and the economy expands modestly. A small open economy DSGE model shows government investment propagates oil-price shocks through a productivity-enhancing channel: higher government investment raises the stock of public capital, which is an input in private production. This leads to an increase in the marginal product of private capital and labor, triggering an expansion. Under a prudent policy by which the government saves part of its oil revenue in a sovereign wealth fund and smooths investment, the shock generates a milder and more long-lasting expansion.

Información adicional

  • Presentador: Juan Guerra
  • Proveniente: Banco Central de Chile
  • Fecha: Miércoles, 25 Abril 2018
  • Hora: 12:00
  • Lugar: Sala R1, FAE