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Alternative Fiscal Rules for Norway

Author

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  • Mr. Daniel Leigh
  • Mr. Etibar Jafarov

Abstract

This paper considers long-term fiscal policy options in Norway, the world's fifth largest oil exporter, in light of the substantial expected increase in pension outlays. It compares the current fiscal rule, which targets a (central government structural) non-oil deficit equal to 4 percent of Government Pension Fund assets, with three alternatives that save a larger share of oil revenue and accumulate more assets to pay for aging costs. It also analyzes the macroeconomic consequences of accumulating more assets, finding that the additional income generated from more assets allows lower tax rates, with positive effects on long-term output.

Suggested Citation

  • Mr. Daniel Leigh & Mr. Etibar Jafarov, 2007. "Alternative Fiscal Rules for Norway," IMF Working Papers 2007/241, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2007/241
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21395
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    References listed on IDEAS

    as
    1. Mr. Douglas Laxton & Mr. Michael Kumhof, 2007. "A Party without a Hangover? On the Effects of U.S. Government Deficits," IMF Working Papers 2007/202, International Monetary Fund.
    2. Dennis Fredriksen & Nils Martin Stølen, 2005. "Effects of demographic development, labour supply and pension reforms on the future pension burden," Discussion Papers 418, Statistics Norway, Research Department.
    3. Bernard Casey & Howard Oxley & Edward Whitehouse & Pablo Antolín & Romain Duval & Willi Leibfritz, 2003. "Policies for an Ageing Society: Recent Measures and Areas for Further Reform," OECD Economics Department Working Papers 369, OECD Publishing.
    4. Benoît Bellone & Alexandra Bibbee, 2006. "The Ageing Challenge in Norway: Ensuring a Sustainable Pension and Welfare System," OECD Economics Department Working Papers 480, OECD Publishing.
    5. International Monetary Fund, 2005. "Norway: Selected Issues," IMF Staff Country Reports 2005/197, International Monetary Fund.
    6. Mr. Jan-Peter Olters & Mr. Daniel Leigh, 2006. "Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon," IMF Working Papers 2006/193, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Torfinn Harding & Frederick Ploeg, 2013. "Official forecasts and management of oil windfalls," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(5), pages 827-866, October.
    2. Barry Eichengreen & Ugo Panizza, 2016. "A surplus of ambition: can Europe rely on large primary surpluses to solve its debt problem?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 31(85), pages 5-49.
    3. Lücke, Matthias, 2010. "Stabilization and savings funds to manage natural resource revenues: Kazakhstan and Azerbaijan vs. Norway," Kiel Working Papers 1652, Kiel Institute for the World Economy (IfW Kiel).
    4. Stuart Landon & Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, , vol. 36(2), pages 117-144, April.
    5. repec:zbw:bofrdp:2008_021 is not listed on IDEAS
    6. Kinnunen, Helvi, 2008. "Government funds and demographic transition : alleviating ageing costs in a small open economy," Research Discussion Papers 21/2008, Bank of Finland.
    7. Mr. Jens R Clausen, 2008. "Calculating Sustainable Non-mineral Balances as Benchmarks for Fiscal Policy: The Case of Botswana," IMF Working Papers 2008/117, International Monetary Fund.
    8. Segal, Paul, 2012. "How to spend it: Resource wealth and the distribution of resource rents," Energy Policy, Elsevier, vol. 51(C), pages 340-348.
    9. Iacono, Roberto, 2017. "A comparison of fiscal rules for resource-rich economies," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 179-193.
    10. 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.
    11. de Aguiar, Thereza R.S. & Freire, Fatima de Souza, 2017. "Shifts in modes of governance and sustainable development in the Brazilian oil sector," European Management Journal, Elsevier, vol. 35(5), pages 701-710.
    12. Wojciech Maliszewski, 2009. "Fiscal Policy Rules for Oil-Producing Countries: A Welfare-Based Assessment," IMF Working Papers 2009/126, International Monetary Fund.
    13. Erixon, Lennart, 2011. "Under the influence of traumatic events, new ideas, economic experts and the ICT revolution - the economic policy and macroeconomic performance of Sweden in the 1990s and 2000s," Research Papers in Economics 2011:25, Stockholm University, Department of Economics.
    14. Kinnunen, Helvi, 2008. "Government funds and demographic transition: alleviating ageing costs in a small open economy," Bank of Finland Research Discussion Papers 21/2008, Bank of Finland.
    15. Kristina V. Shvandar & Vsevolod Y. Cherkasov & Tatiana F. Burova, 2017. "Dutch Disease: Applying the Budget Rule and the Role of Structural Reforms," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 20-32, October.

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    Keywords

    WP; GDP; GPF assets; budget;
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