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Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries; The Case of Cameroon

  • Issouf Samaké
  • Priscilla S. Muthoora
  • Bruno Versailles
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    This paper assesses the implications of the use of oil revenue for public investment on growth and fiscal sustainability in Cameroon. We develop a dynamic stochastic general equilibrium model to analyze the effects of such investment on growth and on the path of key fiscal indicators, such as the non-oil primary deficit and public debt. Policy scenarios show that Cameroon’s large infrastructural needs and relatively low current debt levels could justify a temporary deviation from traditional policy advice that suggests saving part of the oil revenue to smooth expenditure over time. Model simulations show that a relatively high degree of efficiency of public investment is needed for scaled-up public investment to make a significant contribution to growth, while maintaining fiscal sustainability.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/144.

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    Length: 35
    Date of creation: 11 Jun 2013
    Date of revision:
    Handle: RePEc:imf:imfwpa:13/144
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    1. Augustin Kwasi Fosu & Yoseph Yilma Getachew & Thomas Ziesemer, 2012. "Optimal public investment, growth and consumption: evidence from African countries," Brooks World Poverty Institute Working Paper Series 16412, BWPI, The University of Manchester.
    2. Frederick Ploeg, 2012. "Bottlenecks in ramping up public investment," International Tax and Public Finance, Springer, vol. 19(4), pages 509-538, August.
    3. Reinhart, Carmen & Rogoff, Kenneth, 2010. "Debt and Growth Revisited," MPRA Paper 24376, University Library of Munich, Germany.
    4. Reinhart, Carmen M. & Rogoff, Kenneth, 2010. "Growth in a Time of Debt," CEPR Discussion Papers 7661, C.E.P.R. Discussion Papers.
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    6. Torfinn Harding & Frederick Van der Ploeg, 2009. "Is Norway's Bird-in-Hand Stabilization Fund Prudent Enough? Fiscal Reactions to Hydrocarbon Windfalls and Graying Populations," CESifo Working Paper Series 2830, CESifo Group Munich.
    7. Canova, Fabio & Sala, Luca, 2009. "Back to square one: identification issues in DSGE models," CEPR Discussion Papers 7234, C.E.P.R. Discussion Papers.
    8. Sanjeev Gupta & Alvar Kangur & Abdoul Aziz Wane & Chris Papageorgiou, 2011. "Efficiency-Adjusted Public Capital and Growth," IMF Working Papers 11/217, International Monetary Fund.
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    10. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
    11. Plamen Iossifov & Misa Takebe & Zaijin Zhan & Noriaki Kinoshita & Robert C. York, 2009. "Improving Surveillance Across the Cemac Region," IMF Working Papers 09/260, International Monetary Fund.
    12. Marcos Poplawski-Ribeiro & Mauricio Villafuerte & Thomas Baunsgaard & Christine J. Richmond, 2012. "Fiscal Frameworks for Resource Rich Developing Countries," IMF Staff Discussion Notes 12/04, International Monetary Fund.
    13. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
    14. Joel E. Cohen, 2010. "Beyond Population: Everyone Counts in Development," Working Papers 220, Center for Global Development.
    15. 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.
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