|
Optimal Fiscal Rule for Oil Revenue Allocation: Stabilization Role of National Development Fund
|
Alireza Bastani   , Mohammad Javad Razmi * , Ali Akbar Naji , Morteza Baki Haskuee |
| Ferdowsi University of Mashhad |
|
|
Abstract: (3342 Views) |
| Oil exporting countries are continuously subject to oil price shocks. They have to deploy effective policy instruments and fiscal rules to manage the negative effects of these shocks. Sovereign wealth funds have been developed as stabilizing instruments to smooth the government expenditures and provide financial resources for optimal domestic investments. This paper develops and calibrates a dynamic general equilibrium model under uncertainty conditions to develop a fiscal rule for the optimal allocation of oil revenues between saving and current expenditures in a 65 year horizon. According to the results, a conservative fiscal policy in the booming periods is highly advised, since permanent oil shocks are more frequent than transitory shocks. During oil booms, excess oil revenues should be allocated to the National Development Fund (NDF) or the Foreign Exchange Reserve Account. The results also show that optimal investment rate increases is higher in the long run since in a longer term horizon the social planner allocates more funds to NDF to compensate for the negative oil shock. |
|
| Keywords: Fiscal Rule, Permanent Oil Shocks, Bellman Equation, National Development Fund |
|
|
Full-Text [PDF 419 kb]
(909 Downloads)
|
Type of Study: Research |
Subject:
Special
Received: 2018/01/26 | Accepted: 2018/10/24 | Published: 2018/12/16
|
|
|
|
|
|
|
| Send email to the article author |
|
|
|
| Add your comments about this article |
|
|
|
