Managing and Harnessing Volatile Oil Windfalls

Bremer, Ton S. van den; Ploeg, Frederick van der

doi:10.1057/imfer.2013.4

Cited by 31 publications

(15 citation statements)

References 41 publications

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“…Because Angola's public debt burden is relatively low and manageable (at around 30% of GDP), the priority is to invest resource revenue in building productive public capital that is complementary to private investment and, thus, can raise current consumption. In addition, consistent with Van den Bremer and van der Ploeg (), for countries with large and long‐lasting resource revenue flows like Angola, building a sufficient (but not overly large) sized stabilization fund is crucial to maintaining macroeconomic stability.…”

Section: Determining a Sustainable Investment Pathsupporting

confidence: 63%

“…This is similar to the case of Iraq, which has a large and long‐lasting resource revenue horizon. For Iraq, Van den Bremer and van der Ploeg () find that a large liquidity fund (or a stabilization fund here) is required for the precautionary saving purpose to maintain macroeconomic stability.…”

Section: Effects Of Public Investment With Different Approachesmentioning

confidence: 99%

“…van der Ploeg and Venables () study optimal debt, investment and transfer policy in a deterministic environment. In addition, Van den Bremer and van der Ploeg () study optimal savings in different types of resource funds with a simplified fiscal specification and foreign‐supplied private capital. Finally, Araujo et al .…”

Section: Introductionmentioning

confidence: 99%

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Investing Volatile Resource Revenues in Capital‐Scarce Economies

Richmond

Yackovlev

Yang

2015

Pacific Economic Review

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Natural resource revenues are an important financing source for public investment in many developing economies. Investing volatile resource revenues, however, may subject an economy to macroeconomic instability. This paper studies fiscal approaches to investing resource revenues, using Angola as an example. With spend-as-you-go, resource revenues are spent as received, resulting in little external saving; public investment can be interrupted, driving up the capital depreciation rate and undermining stability. Gradual scaling-up, instead, allows countries to build up external saving to shield investment from revenue volatility. The framework adopted here can be used as a planning tool to define a medium-term fiscal strategy.

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Section: Determining a Sustainable Investment Pathsupporting

confidence: 63%

Section: Effects Of Public Investment With Different Approachesmentioning

confidence: 99%

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Investing Volatile Resource Revenues in Capital‐Scarce Economies

Richmond

Yackovlev

Yang

2015

Pacific Economic Review

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“…Indeed, infrastructure spending itself may be inefficient due 3 See for instance Foster and Briceño-Garmendia (2010) and Andersen and Dalgaard (2013). The (in)appropriateness of the conventional PIH prescription has been discussed extensively in the literature; see Collier et al (2010), Gelb and Grassmann (2010), Gelb (2011), van der Ploeg (2011), Baunsgaard et al (2012), International Monetary Fund (2012, Lundgren et al (2013), and van den Bremer and van der Ploeg (2013). 4 See Foster and Briceño-Garmendia (2010) and Freund and Rocha (2010) for the role of transport costs-the highest of any region-in Sub-Saharan Africa.…”

Section: Introductionmentioning

confidence: 99%

“…A number of analytical contributions, including Takizawa et al (2004), Matsen and Torvik (2005), Venables (2010), van der Ploeg (2011van der Ploeg ( , 2012, van der Ploeg andVenables (2011, 2013), Dagher et al (2012), Araujo et al (2013), Berg et al (2013), Richmond et al (2013), and van den Bremer and van der Ploeg (2013), have attempted to address these issues. Several of these contributions bring together elements of the literature on the optimal management of resource windfalls and the literature on the Dutch disease, which considers more broadly the macroeconomic consequences of large inflows of capital (in the form of aid, remittances, or private capital flows, rather than government-related flows only).…”

Section: Introductionmentioning

confidence: 99%

Optimal fiscal management of commodity price shocks

Agénor

2016

Journal of Development Economics

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A dynamic stochastic general equilibrium model is used to study the optimal fiscal response to commodity price shocks in a small open low-income country. The model accounts for imperfect access to world capital markets and a variety of externalities associated with public infrastructure, including utility benefits, a direct complementarity effect with private investment, and reduced distribution costs. However, public capital is also subject to congestion and absorption constraints, with the latter affecting the efficiency of infrastructure investment. The model is parameterized and used to examine the transmission process of a temporary resource price shock under a benchmark case (cash transfers) and alternative fiscal rules, involving either higher public spending or accumulation in a sovereign fund. The optimal allocation rule between spending today and asset accumulation is determined so as to minimize a social loss function defined in terms of the volatility, relative to the benchmark case, of private consumption and either the nonresource primary fiscal balance or a more general index of macroeconomic stability, which accounts for the volatility of the real exchange rate. Sensitivity analysis is conducted with respect to various structural parameters and model specification.

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