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Fiscal Policy Rules for Oil-Producing Countries: A Welfare-Based Assessment
Author:
Wojciech Maliszewskinull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 126
Language:
English
Publication Date:
01 Jun 2009
DOI:
https://doi.org/10.5089/9781451872736.001
ISBN:
9781451872736
ISSN:
1018-5941
Pages:
27
Keywords:
WP; fiscal policy; debt ratio; Fiscal sustainability; nonrenewable resource; oil producers; oil; permanent income; oil GDP; MPOIM rule; social welfare function; oil revenue; benchmark POIM rule; adjustment cost; Government consumption; Income; Oil; gas and mining taxes; Oil prices
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper presents numerical simulations of various fiscal rules for oil-producing countries. Welfare implications are sensitive to the choice of the social welfare function, initial conditions, and non-oil growth prospects. The distribution of non-oil wealth is important for countries with relatively low oil reserves. Corrections for adjustment costs and uncertainty with respect to oil prices should be applied carefully. While avoiding sharp changes in the fiscal policy stance may be appealing, it is not necessarily optimal if the initial position is unsustainable. Ad hoc rules are shown to perform poorly. The analysis abstracts from several issues critical for developing a practical policy advice and should not be treated as a complete framework.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2009: Issue 126