Alternative Fiscal Rules for Norway

IMF Working Papers, October 1, 2007

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Alternative Fiscal Rules for Norway

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Bibliographic details

• Authors: Daniel Leigh, Etibar Jafarov
• Published: October 1, 2007
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451868043.001

Overview and research question

• Authors: Daniel Leigh, Etibar Jafarov
• Date: October 1, 2007
• Core question: Long-term fiscal policy options in Norway in light of the substantial expected increase in pension outlays.
• Context: Norway is described as the world's fifth largest oil exporter.

Current rule and alternatives analyzed

• Current fiscal rule:
  • Targets a (central government structural) non-oil deficit equal to 4 percent of Government Pension Fund assets.
• Alternatives:
  • Three alternative fiscal rules that save a larger share of oil revenue and accumulate more assets to pay for aging costs (each alternative is intended to increase asset accumulation relative to the current rule).

Key findings and macroeconomic consequences

• Increased asset accumulation:
  • Accumulating more assets generates additional income.
  • The additional income generated from more assets allows lower tax rates.
  • Lower tax rates have positive effects on long-term output.
• Comparative implication:
  • The three alternatives save a larger share of oil revenue and accumulate more assets compared with the current rule targeting a 4 percent non-oil deficit.

Policy implications and recommendations (implied by analysis)

• Consider adopting fiscal rules that save a larger share of oil revenue to build assets for future pension outlays.
• Use additional asset income to reduce tax rates to support higher long-term output.

Publication and metadata

• Series: Working Paper No. 2007/241
• Issue: 241
• Volume: 2007
• Pages: 30
• DOI: https://doi.org/10.5089/9781451868043.001
• Stock No: WPIEA2007241
• ISBN: 9781451868043
• ISSN: 1018-5941
• Subjects: Aging, Oil, Oil prices, Oil, gas and mining taxes, Pension spending
• Keywords: budget, GDP, GPF assets, WP

Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/alternative-fiscal-rules-for-norway-21395

Content in this bundle

• Alternative Fiscal Rules for Norway, by Etibar Jafarov and Daniel Leigh, IMF Working Paper 07/241
  • Alternative Fiscal Rules for Norway, by Etibar Jafarov and Daniel Leigh, IMF Working Paper 07/241 (Markdown version)
  • Alternative Fiscal Rules for Norway, by Etibar Jafarov and Daniel Leigh, IMF Working Paper 07/241 (PDF)