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

June 1, 2009

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Format: Chicago

Wojciech Maliszewski. Fiscal Policy Rules for Oil-Producing Countries: A Welfare-Based Assessment, (USA: International Monetary Fund, 2009) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Commodities, Government consumption, Income, National accounts, Oil, Oil prices, Oil, gas and mining taxes, Prices, Taxes

Keywords: Adjustment cost, Benchmark POIM rule, Debt ratio, Fiscal policy, Fiscal sustainability, Gas and mining taxes, Government consumption, Income, MPOIM rule, Nonrenewable resource, Oil, Oil, Oil GDP, Oil prices, Oil producers, Oil revenue, Permanent income, Social welfare function, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/126
Stock No:

WPIEA2009126
ISBN:

9781451872736
ISSN:

1018-5941

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