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Reducing Volatility due to Natural Gas Exports: Is the Answer a Stabilization Fund?

Author

Listed:
  • Andersen, Lykke Eg

    (IISEC, Universidad Católica Boliviana)

  • Faris, Robert

    (IISEC, Universidad Católica Boliviana)

Abstract

An important part of Bolivia’s fiscal revenues are directly tied to world oil prices. Since oil prices are very volatile, so are Bolivia’s fiscal revenues. For example, if oil prices vary as much during the next couple of decades as they did during the previous two decades, then the fiscal revenues arising from our exports of natural gas to Brazil would vary between US$ 141 million per year and US$ 1.1 billion per year, and the revenues in any particular year would be largely unpredictable. Such volatility of fiscal revenues is undesirable, especially for a country that tries to implement a poverty reduction strategy requiring a steady and predictable flow of funds. This paper calculates the likely range values for the revenues that Bolivia will derive from natural gas exports, as well as the likely variation from year to year. Based on these calculations we design a Stabilization Fund, which accumulates money when world oil prices are high and distributes money when oil prices are low. The effect of oil price volatility on the Bolivian economy is evaluated in a CGE model and the advantages and disadvantages of a Stabilization Fund are analyzed. Instituto de Investigaciones Socio - Económicas; IISEC

Suggested Citation

  • Andersen, Lykke Eg & Faris, Robert, 2001. "Reducing Volatility due to Natural Gas Exports: Is the Answer a Stabilization Fund?," Documentos de trabajo 11/2001, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
    • Handle: RePEc:ris:iisecd:2001_011
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    Citations

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    Cited by:

    1. Mora Barrenechea, Mauricio, 2020. "Time-varying effects of commodities prices in the Bolivian economy," MPRA Paper 104706, University Library of Munich, Germany.
    2. Jemio M., Luis Carlos & Wiebelt, Manfred, 2002. "Macroeconomic impacts of external shocks and anti-shock policies in Bolivia: a CGE analysis," Kiel Working Papers 1100, Kiel Institute for the World Economy (IfW Kiel).
    3. Stela Cani, 2009. "Resource Abundance, Mineral Funds and Institutional Quality," Economics Discussion Papers em-dp2009-04, Department of Economics, University of Reading.
    4. Baja Daza, Gover & Fernández Tellería, Bernardo X. & Zavaleta Castellón, David, 2014. "Diminishing commodity prices and capital flight in a dutch disease and resource curse environment: The case of Bolivia," MPRA Paper 75702, University Library of Munich, Germany, revised Dec 2014.
    5. Andersen, Lykke Eg & Faris, Robert, 2002. "Natural Gas and Income Distribution in Bolivia," Documentos de trabajo 1/2002, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.

    More about this item

    Keywords

    Natural Gas Exports; Bolivian Economy; Bolivia-Brazil; Instituto de Investigaciones Socio - Económicas; IISEC;
    All these keywords.

    JEL classification:

    • Z00 - Other Special Topics - - General - - - General

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