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Author/Editor:
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Berg, Andrew ; Portillo, Rafael ; Yang, Shu-Chun ; Zanna, Luis-Felipe
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Publication Date:
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November 15, 2012
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Electronic Access:
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Free Full text
(PDF file size is 895KB).
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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
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Summary:
Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of investing natural resource revenues, making explicit the role of pervasive features in these countries including public investment inefficiency, absorptive capacity constraints, Dutch disease, and financing needs to sustain capital. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. Using the model, country applications show how combining public investment with a resource fund---a sustainable investing approach---can help address the macroeconomic problems associated with both exhaustibility and volatility. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up (accounting for the financing needs to sustain capital) and the adequate size of a stabilization fund (buffer).
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Order a print copy
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Series:
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Working Paper No. 12/274
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Subject(s):
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Public investment | Natural resources | Revenues | Resource allocation | Development | Developing countries | Cross country analysis
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English
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Publication Date:
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November 15, 2012
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ISBN/ISSN:
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9781475535563/2227-8885
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Format:
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Paper
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Stock No:
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WPIEA2012274
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Pages:
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48
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Price:
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US$18.00 )
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Please address any questions about this title to
publications@imf.org
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