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

Author/Editor:

Wojciech Maliszewski

Publication Date:

June 1, 2009

Electronic Access:

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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:

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.

Series:

Working Paper No. 09/126

Subject:

English

Publication Date:

June 1, 2009

ISBN/ISSN:

9781451872736/1018-5941

Stock No:

WPIEA2009126

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

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