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Fiscal Policy Rules for Oil-Producing Countries; A Welfare-Based Assessment

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  • Wojciech Maliszewski

Abstract

The paper presents numerical simulations of various fiscal rules for oil-producing countries. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non-oil growth prospects. The distribution of non-oil wealth is important for countries with relatively low oil reserves. Corrections for adjustment costs and uncertainty with respect to oil prices should be applied carefully. While avoiding sharp changes in the fiscal policy stance may be appealing, it is not necessarily optimal if the initial position is unsustainable. Ad hoc rules are shown to perform poorly. The analysis abstracts from several issues critical for developing a practical policy advice and should not be treated as a complete framework.

Suggested Citation

  • Wojciech Maliszewski, 2009. "Fiscal Policy Rules for Oil-Producing Countries; A Welfare-Based Assessment," IMF Working Papers 09/126, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/126
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    References listed on IDEAS

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    1. Rodrigo O. Valdes & Eduardo M Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
    2. Alonso A Segura Vasi, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis; The Case of São Tomé and Príncipe," IMF Working Papers 06/183, International Monetary Fund.
    3. Stéphane Carcillo & Mauricio Villafuerte & Daniel Leigh, 2007. "Catch-Up Growth, Habits, Oil Depletion, and Fiscal Policy; Lessons from the Republic of Congo," IMF Working Papers 07/80, International Monetary Fund.
    4. Jan-Peter Olters & Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy; Lessons from Gabon," IMF Working Papers 06/193, International Monetary Fund.
    5. Daniel Leigh & Etibar Jafarov, 2007. "Alternative Fiscal Rules for Norway," IMF Working Papers 07/241, International Monetary Fund.
    6. Ludvig Söderling & Hanan Morsy & Martin Petri & Martin Hommes & Manal Fouad & Wojciech Maliszewski, 2007. "Public Debt and Fiscal Vulnerability in the Middle East," IMF Working Papers 07/12, International Monetary Fund.
    7. Jan-Peter Olters, 2007. "Old Curses, New Approaches? Fiscal Benchmarks for Oil-Producing Countries in Sub-Saharan Africa," IMF Working Papers 07/107, International Monetary Fund.
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    Citations

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    Cited by:

    1. Eduardo Engel & Christopher Neilson & Rodrigo Valdés, 2013. "Chile’s Fiscal Rule as Social Insurance," Central Banking, Analysis, and Economic Policies Book Series,in: Luis Felipe Céspedes & Jordi Galí (ed.), Fiscal Policy and Macroeconomic Performance, edition 1, volume 17, chapter 10, pages 393-425 Central Bank of Chile.
    2. repec:asi:ajoerj:2017:p:176-201 is not listed on IDEAS
    3. Agénor, Pierre-Richard, 2016. "Optimal fiscal management of commodity price shocks," Journal of Development Economics, Elsevier, vol. 122(C), pages 183-196.
    4. Landon, Stuart & Smith, Constance, 2017. "Does the design of a fiscal rule matter for welfare?," Economic Modelling, Elsevier, vol. 63(C), pages 226-237.
    5. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    6. repec:eee:ecanpo:v:55:y:2017:i:c:p:179-193 is not listed on IDEAS
    7. Keyra Primus, 2016. "Fiscal Rules for Resource Windfall Allocation; The Case of Trinidad and Tobago," IMF Working Papers 16/188, International Monetary Fund.
    8. Iacono, Roberto, 2017. "A comparison of fiscal rules for resource-rich economies," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 179-193.

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