Implementable Fiscal Rules for an Oil-Exporting Small Open Economy Facing Depletion
AbstractIn this paper I compute implementable ?scal rules for a small open economy whose treasury is dependent on oil revenues and whose oil sector is shrinking. I model production in the oil and non oil sector and I analyze the e¤ects of implementing di¤erent sustainable ?scal rules in the context of a deteriorating oil sector. I assess the policy?s performance in terms of conditional and unconditional welfare. I show that rules that ?nance government purchases with structural revenue are preferred only if government purchases do not enter the utility function. Otherwise, when government purchases are complements with private consumption, depletion makes rules that ?nance government purchases with current revenue more attractive. Furthermore,the lower the sustainable level of oil extraction, the harder it is to reject a rule that ?nances government purchases with current oil revenue.
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Bibliographic InfoPaper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 019.
Date of creation: 2008
Date of revision:
oil depletion; fiscal rules;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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