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

  • Wojciech Maliszewski
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    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.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/126.

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    Length: 27
    Date of creation: 01 Jun 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/126
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    1. Daniel Leigh & Etibar Jafarov, 2007. "Alternative Fiscal Rules for Norway," IMF Working Papers 07/241, International Monetary Fund.
    2. 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.
    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. Alonso Segura, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis; The Case of Sao tome and Principe," IMF Working Papers 06/183, International Monetary Fund.
    5. Eduardo M.R.A. Engel & Rodrigo Valdés, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," Documentos de Trabajo 78, Centro de Economía Aplicada, Universidad de Chile.
    6. 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.
    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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