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Official forecasts and management of oil windfalls

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Abstract

Official forecasts for oil revenues and the burden of pensioners are used to estimate forward-looking fiscal policy rules for Norway and compared with permanent-income and bird-in-hand rules. The results suggest that fiscal reactions have been partial forward-looking with respect to the rising pension bill, but backward-looking with respect to oil and gas revenues. Solvency of the government finances might be an issue with the fiscal rules estimated from historical data. Simulation suggests that declining oil and gas revenue and the costs of a rapidly graying population will substantially deteriorate the net government asset position by 2060 unless fiscal policy becomes more prudent or current pension and fiscal reforms are successful.

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Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 676.

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Date of creation: Jan 2012
Handle: RePEc:ssb:dispap:676
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Keywords: oil windfalls; official forecasts; forward-looking fiscal policy rules; permanent income hypothesis; graying population; debt sustainability;

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Find related papers by JEL classification:
  • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
  • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
  • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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Cited by:

  1. Matsen, Egil & Natvik, Gisle J. & Torvik, Ragnar, 2016. "Petro populism," Journal of Development Economics, Elsevier, vol. 118(C), pages 1-12.
    • Egil Matsen & Gisle J. Natvik & Ragnar Torvik, 2012. "Petro populism," Working Paper 2012/06, Norges Bank.
    • Egil Matsen & Ragnar Torvik & Gisle J. Natvik, 2012. "Petro populism," Working Paper Series 12812, Department of Economics, Norwegian University of Science and Technology.
    • Egil Matsen & Gisle J. Natvik & Ragnar Torvik, 2014. "Petro Populism," Working Papers 0019, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  2. Roberto Iacono, 2014. "On the Interplay Between Intergenerational Transfers and Natural Resources," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 12(2), pages 167-199.
  3. Iacono, Roberto, 2015. "The Basilicata Wealth Fund: resource policy and long-run economic development in Southern Italy," MPRA Paper 66393, University Library of Munich, Germany.
  4. Ton S van den Bremer & Frederick van der Ploeg, 2013. "Managing and Harnessing Volatile Oil Windfalls," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(1), pages 130-167, April.
  5. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
  6. Torfinn Harding & Anthony J Venables, 2016. "The Implications of Natural Resource Exports for Nonresource Trade," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 268-302, June.
  7. Malova, Aleksandra & van der Ploeg, Frederick, 2017. "Consequences of lower oil prices and stranded assets for Russia's sustainable fiscal stance," Energy Policy, Elsevier, vol. 105(C), pages 27-40.

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