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Guidelines for Exploiting Natural Resource Wealth

  • Frederick van der Ploeg

The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth.

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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 128.

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Date of creation: 2014
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Handle: RePEc:oxf:oxcrwp:128
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  1. Philippe Bacchetta & Kenza Benhima & Yannick Kalantzis, 2014. "Optimal Exchange Rate Policy in a Growing Semi-Open Economy," IMF Economic Review, Palgrave Macmillan, vol. 62(1), pages 48-76, April.
  2. Samuel Wills, 2013. "Optimal Monetary Responses to Oil Discoveries," Economics Series Working Papers OxCarre Research Paper 12, University of Oxford, Department of Economics.
  3. Rick van der Ploeg & Steven Poelhekke, 2010. "The Pungent Smell of 'Red Herrings': subsoil assets, rents, volatility and the resource curse," OxCarre Working Papers 033, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  4. Rick Van der Ploeg & Tony Venables, 2011. "Harnessing windfall revenues: Optimal policies for resource-rich developing economies," Economics Series Working Papers 543, University of Oxford, Department of Economics.
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  7. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
  8. Mark Aguiar & Manuel Amador, 2011. "Growth in the Shadow of Expropriation," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 651-697.
  9. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
  10. Pindyck, Robert S, 1980. "Uncertainty and Exhaustible Resource Markets," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1203-25, December.
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  12. Kirk Hamilton & John Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 615-621, May.
  13. Paul Segal, 2011. "How to spend it: resource wealth and the distribution of resource rents," LSE Research Online Documents on Economics 55664, London School of Economics and Political Science, LSE Library.
  14. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  15. Paul Collier & Frederick van der Ploeg & Michael Spence & Anthony J Venables, 2009. "Managing Resource Revenues in Developing Economies," OxCarre Working Papers 015, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  16. Gaudet, Gerard & Khadr, Ali M, 1991. "The Evolution of Natural Resource Prices under Stochastic Investment Opportunities: An Intertemporal Asset-Pricing Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 441-55, May.
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