Extractive revenues and government spending: Short- versus long-term considerations

Arbeitspapier

The prescription of optimally managing natural resource revenue windfalls by smoothing consumption across generations using an intergenerational sovereign wealth fund that only invests in foreign assets is not appropriate for resource-rich developing economies. It is better for these economies to use their windfalls to boost investment in the domestic economy, especially when they confront capital scarcity and have poor access to international capital markets. However, it is important for such economies to have a parking fund to temporarily 'park' funds until absorption constraints are alleviated, and a stabilization fund to smooth out volatile budgets given the high stochastic volatility of commodity prices, especially if the economy is inflexible and has few other ways of adjusting to shocks.

Object Details

• ISBN: 978-92-9256-269-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Working Paper ; No. 2017/45

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; Economic Growth of Open Economies ; Taxation and Subsidies: Efficiency; Optimal Taxation ; National Debt; Debt Management; Sovereign Debt ; Macroeconomic Analyses of Economic Development ; Resource Booms
• Subject: resource curse ; managing windfalls ; fiscal rules

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): van der Ploeg, Frederick ; Venables, Anthony J.
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2017

Further information

• DOI: doi:10.35188/UNU-WIDER/2017/269-4
• Handle: http://hdl.handle.net/10419/161609
• Last update: 10.03.2025, 11:43 AM CET