Direktorat Jenderal Perbendaharaan

This study examines how natural resource revenue shocks influence fiscal dynamics and fiscal resilience in local governments in Eastern Indonesia, with a particular focus on the role of fiscal synchronization. Despite substantial revenue inflows from natural resource extraction, many subnational governments continue to experience fiscal instability, suggesting that the problem lies not only in the magnitude of revenues but in the timing and coordination of fiscal flows. Building on this premise, the study develops the concept of fiscal synchronization, defined as the alignment between revenue inflows, expenditure adjustments, and fiscal liquidity management within local fiscal systems. The research proposes a causal mechanism in which exogenous global commodity price shocks generate irregular intergovernmental transfers, leading to cash flow mismatches, suboptimal expenditure timing, and ultimately fiscal instability.
Empirically, the study employs a continuous difference-in-differences (DiD) framework using district-level panel data from 2010 to 2024. The analysis exploits variation in exposure to resource-based revenues and global commodity price fluctuations to identify the causal impact of revenue shocks on fiscal outcomes. Fiscal synchronization is measured through expenditure elasticity, distributed lag structures, and fiscal gap indicators, while fiscal resilience is assessed through the stability of fiscal balances and expenditure patterns. The findings are expected to contribute to the literature by integrating insights from resource economics, fiscal federalism, and public financial management into a unified analytical framework. By highlighting fiscal synchronization as a key transmission mechanism, the study provides a novel explanation for persistent fiscal instability in resource-dependent regions and offers policy-relevant insights for improving fiscal resilience in decentralized governance systems.

Navigating the Resource Pulse: Fiscal Synchronization and Local Government Fiscal Resilience under Natural Resource Revenue Shocks in Eastern Indonesia