Recent studies offer evidence of reduced fiscal procyclicality to commodity price changes in resource-rich countries-a feature commonly attributed to the adoption of fiscal policy rules. We revisit this issue and find that, by controlling for global activity shocks while allowing for time-varying changes in both fiscal policy and the volatility of shocks, this finding does not hold. To show this we develop a time-varying dynamic factor model, allowing for a multiple of shocks, stochastic volatility and time-varying parameters, and estimate it on data for Norway, whose handling of resource wealth is often cited as exemplary.
