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)| false Barnett, S.and R. Ossowski, 2003, “ Operational Aspects of Fiscal Policy in Oil-Producing Countries,” in Fiscal Policy Formulation and Implementation in Oil-Producing Countries, ed. by J. Davis, R., Ossowski, and ( A. Fedelino Washington: International Monetary Fund).
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)| false van der Ploeg, F.and A. Venables, 2008. “ Harnessing Windfall Revenues in Developing Economies: Sovereign Wealth Funds and Optimal Tradeoffs Between Citizen Dividends, Public Infrastructure and Debt Reduction,” CEPR Discussion Papers 6954, C.E.P.R. Discussion Papers.
I would like to thank Mark Horton, Paulo Medas, Mauricio Villafuerte, and Daria Zakharova for their helpful comments and suggestions, and Nezha Khaneboubi for editorial assistance.
Although the paper refers to oil-producing countries, the discussion applies more generally to countries with large nonrenewable resources.
See Carcillo et al. (2007), Leigh and Olters (2006), Olters (2007), and Segura (2006) for examples. See van der Ploeg and Venables (2008) for an example of recent theoretical discussions of fiscal policy in OPCs.
They face no constraints on international borrowing, and therefore all private sector investment projects with positive net present value are financed.
Interestingly, the “non-bequest” assumption has rarely been tested for OPCs.
Since we do not distinguish between public and private consumption, transfers to citizens and spending on public goods are equivalent.
and that the ratio of government consumption to non-oil GDP converges to zero as government consumption per capita remains constant and the non-oil GDP growth is faster than the rate of population growth.
Empirical verification of this parameter in case of a falling per capita income is more difficult. Persistent declines in per capita output are rarely expected, and while high public debt levels are common, there is a limited number of non-oil countries with substantial public financial assets to guard against such an outcome (for oil-rich countries, it is difficult to distinguish between asset accumulation from oil and non-oil revenues).
The estimation sample contains the WEO projection for 2008–12 to incorporate out-of-sample information about the price process.
This is because all reported mean social welfare functions take negative values and therefore lower absolute values indicate a better performance.
Since the government taxes all non-oil income under this rule, the government consumption is the same as total consumption in the economy
Net foreign financial assets remain positive at the end of the simulation sample, but they ultimately turn negative and converge to a debt limit as discussed above.
Uncertainty is not taken into account in the derivation of the MPOIM rule with adjustment costs.