Advanced Search
MyIDEAS: Login

Oil Exporters’ Dilemma: How Much to Save and How Much to Invest

Contents:

Author Info

  • Cherif, Reda
  • Hasanov, Fuad

Abstract

Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data in the 2000s, precautionary saving is sizable and the marginal propensity to consume out of permanent shocks is below one, in stark contrast to the predictions of the perfect foresight model. The optimal investment rate is high if productivity in the tradable sector is high enough.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0305750X13001617
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 52 (2013)
Issue (Month): C ()
Pages: 120-131

as in new window
Handle: RePEc:eee:wdevel:v:52:y:2013:i:c:p:120-131

Contact details of provider:
Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: oil exporters; fiscal policy; volatility; investment; precautionary saving; buffer-stock;

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Paul Collier & Rick Van Der Ploeg & Michael Spence & Anthony J Venables, 2010. "Managing Resource Revenues in Developing Economies," IMF Staff Papers, Palgrave Macmillan, vol. 57(1), pages 84-118, April.
  2. Carroll, Christopher D., 2009. "Precautionary saving and the marginal propensity to consume out of permanent income," CFS Working Paper Series 2009/16, Center for Financial Studies (CFS).
  3. H. Takizawa & E. H. Gardner & Kenichi Ueda, 2004. "Are Developing Countries Better Off Spending their Oil Wealth Upfront?," IMF Working Papers 04/141, International Monetary Fund.
  4. Frederick Van der Ploeg, 2010. "Aggressive Oil Extraction and Precautionary Saving: Coping with Volatility," CESifo Working Paper Series 3038, CESifo Group Munich.
  5. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, With and Without Liquidity Constraints (Expanded Version)," NBER Working Papers 8387, National Bureau of Economic Research, Inc.
  6. Alun H. Thomas & Tamim Bayoumi, 2009. "Today versus Tomorrow: The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income," IMF Working Papers 09/248, International Monetary Fund.
  7. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  8. Eduardo Borensztein & Damiano Sandri & Olivier Jeanne, 2009. "Macro-Hedging for Commodity Exporters," IMF Working Papers 09/229, International Monetary Fund.
  9. Christopher D. Carroll, 1996. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," NBER Working Papers 5788, National Bureau of Economic Research, Inc.
  10. International Monetary Fund, 2012. "Commodity Price Volatility and the Sources of Growth," IMF Working Papers 12/12, International Monetary Fund.
  11. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc.
  12. Andrew Berg & Rafael Portillo & Shu-Chun S Yang & Luis-Felipe Zanna, 2013. "Public Investment in Resource-Abundant Developing Countries," IMF Economic Review, Palgrave Macmillan, vol. 61(1), pages 92-129, April.
  13. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September.
  14. Ton S. van den Bremer & Frederick van der Ploeg, 2012. "How to Spend a Windfall: Dealing with volatility and capital scarcity," OxCarre Working Papers 085, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  15. Frederick van der Ploeg & Anthony J. Venables, 2011. "Harnessing Windfall Revenues: Optimal Policies for Resource‐Rich Developing Economies," Economic Journal, Royal Economic Society, vol. 121(551), pages 1-30, March.
  16. Elif C. Arbatli, 2008. "Futures Markets, Oil Prices and the Intertemporal Approach to the Current Account," Working Papers 08-48, Bank of Canada.
  17. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. " Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
  18. Rodrigo O. Valdés & Eduardo Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
  19. Cherif, Reda & Hasanov, Fuad, 2011. "The volatility trap: why do big savers invest relatively little?," MPRA Paper 31286, University Library of Munich, Germany.
  20. Douglas Dacy & Fuad Hasanov, 2011. "A Finance Approach To Estimating Consumption Parameters," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 122-154, 01.
  21. repec:idb:brikps:72498 is not listed on IDEAS
  22. Rudolfs Bems & Irineu E. Carvalho Filho, 2009. "Current Account and Precautionary Savings for Exporters of Exhaustible Resources," IMF Working Papers 09/33, International Monetary Fund.
  23. Alun H. Thomas & Jun Il Kim & Aqib Aslam, 2008. "Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries," IMF Working Papers 08/198, International Monetary Fund.
  24. Damiano Sandri, 2011. "Precautionary Savings and Global Imbalances in World General Equilibrium," IMF Working Papers 11/122, International Monetary Fund.
  25. Agustin Roitman & Christian Daude, 2011. "Imperfect Information and Saving in a Small Open Economy," IMF Working Papers 11/60, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yesin, 2013. "Merchanting and current account balances," Globalization and Monetary Policy Institute Working Paper 140, Federal Reserve Bank of Dallas.
  2. Carlos Caceres & Serhan Cevik & Ricardo Fenochietto & Borja Gracia, 2013. "The Day After Tomorrow: Designing an Optimal Fiscal Strategy for Libya," IMF Working Papers 13/79, International Monetary Fund.
  3. Reda Cherif & Fuad Hasanov, 2012. "The Volatility Trap: Precautionary Saving, Investment, and Aggregate Risk," IMF Working Papers 12/134, International Monetary Fund.
  4. Ahmadov, Ingilab & Mammadov, Jeyhun & Aslanli, Kenan, 2013. "Assessment of Institutional Quality in Resource-Rich Caspian Basin Countries," MPRA Paper 47430, University Library of Munich, Germany.
  5. Juliana Dutra Araujo & Grace Bin Li & Marcos Poplawski-Ribeiro & Luis-Felipe Zanna, 2013. "Current Account Norms in Natural Resource Rich and Capital Scarce Economies," IMF Working Papers 13/80, International Monetary Fund.
  6. Christine J. Richmond & Irene Yackovlev & Shu-Chun S. Yang, 2013. "Investing Volatile Oil Revenues in Capital-Scarce Economies: An Application to Angola," IMF Working Papers 13/147, International Monetary Fund.
  7. Jean-Pierre Allegret & Cécile Couharde & Dramane Coulibaly & Valérie Mignon, 2013. "Current Accounts and Oil Price Fluctuations in Oil-Exporting Countries: the Role of Financial Development," Working Papers 2013-19, CEPII research center.
  8. Cherif, Reda & Hasanov, Fuad, 2011. "The volatility trap: why do big savers invest relatively little?," MPRA Paper 31286, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:52:y:2013:i:c:p:120-131. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.