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THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS" DinarDailyUpdates?bg=330099&fg=FFFFFF&anim=1

THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS"

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THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS" Empty THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS"

Post by claud39 on Wed Feb 19, 2020 8:58 am

THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS"




2020-02-19


THE ARAB MONETARY FUND PUBLISHES A STUDY ENTITLED: "GOVERNMENT SPENDING MULTIPLES IN LIGHT OF OIL PRICE FLUCTUATIONS" Logo-ar










The Arab Monetary Fund publishes a study on

 Complications of government spending in light of oil price fluctuations




In the context of the efforts made by the Arab Monetary Fund in the field of studies and research activity aimed at supporting decision makers in Arab countries in priority economic and financial policy issues and issues, the Fund prepared a study on " government spending multiples in light of oil price fluctuations ." The study aimed to assess the impact of government spending on GDP in Arab countries in light of fluctuations in oil prices, with a special distinction between two cases of spending multiples in periods of oil price increases compared to periods of low.


The price of oil is one of the most important economic variables affecting the economies of the world in general and the Arab region in particular. Oil prices began to decline in 2014, and have since stabilized, at moderate levels compared to their relatively high levels recorded in 2013. This situation has led to challenges for the budgets of the oil-exporting Arab economies, which have embarked on fiscal and fiscal measures and reforms such as the introduction of value-added tax In some countries of the Cooperation Council for the Arab States of the Gulf, and the trend of other countries towards liberalizing the prices of oil derivatives locally, in part or in whole, whether in the oil exporting countries or importing it.


In the wake of lower oil prices, most studies have focused on reviewing financial policies in oil-exporting countries in general and the Arab region in particular. At a time when oil-producing countries affected by the decline in oil prices must make great efforts to control public financial conditions to correct imbalances in the public budget and current account, the evaluation and review of financial complications in light of oil price movements has become important. Moreover, oil importers have always been affected by the relatively sharp rise in oil prices. Therefore, assessing the spending multiples of these countries in light of oil price fluctuations is important, helping them to make the best choice regarding financial policy tools that should be activated when necessary, especially since these countries have relatively diverse tax systems that can be used when their spending policy is ineffective .


In this context, the study evaluated the multiples of public spending in Arab countries during the period between 1983 and 2018, using self-directed structural models. The study concluded that spending multiples in light of low oil prices are much higher compared to their counterparts in the case of increased oil prices, as it can reach values ​​greater than one for many countries in the short term, while exceeding the value of two in the long run. These results are in line with what has been observed in recent literature on financial complications, especially in advanced economies, where financial complications are significant during a recession, while they are weak or even negative during times of economic expansion.


For many oil-exporting countries, the continued decline in oil prices is an indication of economic recession in these countries . Moreover, it is observed on average that the spending multiples in the oil-exporting countries are higher than those in the importing countries at the time of low oil prices, while the opposite is noticed at the time of increasing prices.


In light of these results, the study recommended that the design of financial policy take into account the direction of oil price movements, especially in the countries exporting to it, where financial policies must be contrary to the cycle of oil prices. In times of stagnation resulting from low oil prices, for example, public spending levels need to increase because government spending in this period does not lead to crowding out private spending, unlike prosperity times, resulting from increased oil prices for these countries, as some government expenditures are likely to Crowding private spending, which contributes to lowering government spending multiples.
 

The full version of the study is available at this link





















claud39
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