The form of government and fiscal dynamics

Using a combination of time series variation in oil prices and cross-section variation in the oil intensity of countries, this paper investigates whether exogenous shifts in the government revenues affect the government expenditures differently depending on the political institutions of the form of government. Comparing the fiscal policy dynamics in parliamentary and presidential systems, a main finding is that the government expenditures appear more responsive to shifts in the revenues when the form of government is presidential.

Research highlights► The form of government was found to be a determinant of the fiscal policy dynamics. ► Oil revenues have stronger fiscal effects in presidential than in parliamentary systems. ► The form of government matters more for the fiscal dynamics than other institutional.