Advanced Search
MyIDEAS: Login to save this paper or follow this series

Catch-Up Growth, Habits, Oil Depletion, and Fiscal Policy

Contents:

Author Info

  • Stéphane Carcillo
  • Mauricio Villafuerte
  • Daniel Leigh

Abstract

In a number of oil producing countries, oil revenue accounts for the majority of government revenue, but is expected to be depleted in a relatively short time frame. Ensuring that fiscal policy is on a sustainable path is thus a high priority, but political and social adjustment costs create incentives to delay fiscal consolidation. This paper estimates how the permanently sustainable non-oil primary deficit (PSNOPD) depends on the speed of consolidation, using an optimization model with habit formation. Realism is added by allowing for negative growth-adjusted interest rates during a temporary period of catch-up growth. Applied to the Republic of Congo, this approach leads to the following conclusions: (i) the current fiscalpolicy stance is unsustainable; (ii) social adjustment costs justify spreading the bulk of the adjustment over five years; and (iii) the slower the adjustment, the lower the PSNOPD level.

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.imf.org/external/pubs/cat/longres.aspx?sk=20541
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/80.

as in new window
Length: 28
Date of creation: 01 Apr 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/80

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Oil; Republic of Congo; Economic growth; Oil revenues; Adjustment process; fiscal policy; primary deficit; expenditure; government spending; public spending; public expenditure; fiscal sustainability; expenditures; public debt; public expenditure management; primary expenditure; expenditure management; fiscal adjustment; capital expenditures; fiscal indicators; key fiscal indicators; government expenditure; fiscal strategy; sustainable fiscal policy; medium-term fiscal strategy; capital expenditure; primary fiscal balance; government revenue; fiscal consolidation; government expenditures; budget constraint; fiscal balance; cuts in government spending; fiscal performance; fiscal policy formulation; tax system; fiscal imbalances; taxation; size of government spending; tax administration; tax ratio; public finance; public financial management; level of public spending; debt-service; fiscal affairs department; expansionary fiscal; fiscal stance; fiscal affairs; expansionary fiscal policy; quality of public spending; fiscal targets; government solvency; fiscal sustainability analysis; medium- term fiscal strategy; interest expenditure; medium-term projections; fiscal response; fiscal deficit; fiscal discipline;

This paper has been announced in the following NEP Reports:

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. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, American Economic Association, vol. 90(3), pages 367-390, June.
  2. Gunnar Tersman, 1991. "Oil, National Wealth, and Current and Future Consumption Possibilities," IMF Working Papers 91/60, International Monetary Fund.
  3. Alonso Segura, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis," IMF Working Papers 06/183, International Monetary Fund.
  4. Jan-Peter Olters & Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy," IMF Working Papers 06/193, International Monetary Fund.
  5. Dhaneshwar Ghura & Rina Bhattacharya, 2006. "Oil and Growth in the Republic of Congo," IMF Working Papers 06/185, International Monetary Fund.
  6. 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.
  7. Xavier Sala-i-Martin & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Discussion Papers, Columbia University, Department of Economics 0203-15, Columbia University, Department of Economics.
  8. Oya Celasun & Xavier Debrun & Jonathan David Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries," IMF Working Papers 06/67, International Monetary Fund.
  9. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse," IMF Working Papers 03/139, International Monetary Fund.
  10. Christopher Carroll, 2002. "'Risky Habits' and the Marginal Propensity to Consume Out Of Permanent Income," Computing in Economics and Finance 2002, Society for Computational Economics 42, Society for Computational Economics.
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. Wojciech Maliszewski, 2009. "Fiscal Policy Rules for Oil-Producing Countries," IMF Working Papers 09/126, International Monetary Fund.
  2. Jens R. Clausen, 2008. "Calculating Sustainable Non-Mineral Balances As Benchmarks for Fiscal Policy," IMF Working Papers 08/117, International Monetary Fund.

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:imf:imfwpa:07/80. 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: (Jim Beardow) or (Hassan Zaidi).

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.