Official forecasts and management of oil windfalls

Abstract

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. Keywords

The Implications of Natural Resource Exports for Nonresource Trade

“…17 The optimal intertemporal responses for a country facing foreign exchange windfalls are similar to those from fiscal revenue windfalls from natural resource extraction. See Harding and van der Ploeg (2013) for theory and evidence on the latter. We leave it for future research to identify present value effects in our context.…”

Managing and Harnessing Volatile Oil Windfalls

“…16 Hence, r à ¼ r à Àg/s ¼ 1.4 percent, 2.4 percent, and 2.0 percent for Norway, Iraq, and Ghana, respectively if s ¼ 0.5. 17 The coefficients for the effects of the public and publicly guaranteed debt to GNI, the ratio of central bank reserves to GDP and the probability of default on the log of the interest rate spread are, respectively, 1.89, À4.14, and 0.296. van der Ploeg, 2012). To capture that absorption problems frustrate rapid economic development and to allow a more realistic calibration of the model, we have internal costs of adjustment.…”

“…Norway's fiscal rule for the nonresource primary public sector deficit has been estimated for 1954-2007 using official forecasts for the expectations on future oil/gas revenue to calculate permanent values (Harding and van der Ploeg, 2012). The PIH implies values of 0 and 1 for the coefficients on current and permanent oil/gas revenue and is rejected by the data: the estimated rule suggests that a third not zero of each dollar of oil and gas revenue is used to raise the primary public sector deficit and for permanent oil and gas revenue the effect is 0.3, not 1.…”

Arctic Oil and Public Finance: Norway’s Lofoten Region and Beyond

“…The BIH approach to resource revenue management in Norway was originally adopted as a puppet of prudence. In hindsight, most risk factors have turned out favourably, and the GPF has outgrown everybody's expectations (e.g., Bjerkholt andNiculescu, 2004: Harding andvan der Ploeg, 2013). The two approaches to government spending of resource revenues have significantly different implications for the absorption of cash-flows from Lofoten oil and gas activities.…”