What Does Norway Get Out Of Its Oil Fund, if Not More Strategic Infrastructure Investment?
AbstractFor the past generation Norway has supplied Europe and other regions with oil, taking payment in euros or dollars. It then sends nearly all this foreign exchange abroad, sequestering its oil-export receipts—which are in foreign currency—in the "oil fund," to invest mainly in European and US stocks and bonds. The fund now exceeds $500 billion, second in the world to that of Abu Dhabi. It is claimed that treating these savings as a mutual fund invested in a wide array of US, European, and other stocks and bonds (and now real estate) avoids domestic inflation that would result from spending more than 4 percent of the returns to this fund at home. But the experience of sovereign wealth funds in China, Singapore, and other countries has been that investing in domestic infrastructure serves to lower the cost of living and doing business, making the domestic economy more competitive, not less. This paper cites the debate that extends from US 19th-century institutional doctrine to the approach of long-time Russian Chamber of Commerce and Industry President Yevgeny Primakov to illustrate the logic behind spending central bank and other sovereign foreign-exchange returns on modernizing and upgrading the domestic economy rather than simply recycling the earnings to US and European financial markets in what looks like an increasingly risky economic environment, as these economies confront debt deflation and increasing fiscal tightness.
Download InfoIf 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.
Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_657.
Date of creation: Mar 2011
Date of revision:
Contact details of provider:
Web page: http://www.levyinstitute.org
Sovereign Wealth Funds; Norway; Oil Fund;
Find related papers by JEL classification:
- H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Marie-Celeste Edwards).
If references are entirely missing, you can add them using this form.