From Volatility to Stability in Expenditure: Stabilization Funds in Resource-Rich Countries

Author/Editor: Naotaka Sugawara
Publication Date: March 12, 2014
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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
Summary: This paper examines the effect of stabilization funds on the volatility of government expenditure in resource-rich countries. Using a panel data set of 68 resource-rich countries over 1988–2012, the results find that the existence of stabilization funds contributes to smoothing government expenditure. The spending volatility in countries that have established such funds is found to be 13 percent lower in the main estimation, and similar impacts are found in robustness tests. The analysis also shows that political institutions and fiscal rules are significant factors in reducing the expenditure volatility, while highlighting the roles of the size of economy, diversified exports, real sector management, and financial markets.
Series: Working Paper No. 14/43
Subject(s): Government expenditures | Natural resources | Fiscal policy | Fiscal stability | Economic models

Publication Date: March 12, 2014
ISBN/ISSN: 9781475515275/1018-5941 Format: Paper
Stock No: WPIEA2014043 Pages: 49
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