Budget Rules and Resource Booms : A Dynamic Stochastic General Equilibrium Analysis

Devarajan, Shantayanan ; Dissou, Yazid ; Go, Delfin S. ; Robinson, Sherman

World Bank Group, Washington, DC

关键词: ACCOUNTING;    ADJUSTMENT COST;    ADJUSTMENT COST FUNCTION;    ADJUSTMENT COST PARAMETER;    ADJUSTMENT COSTS;   

DOI  :  10.1596/1813-9450-6984
RP-ID  :  WPS6984

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper develops a dynamic stochasticgeneral equilibrium model to analyze and derive simplebudget rules in the face of volatile public revenue fromnatural resources in a low-income country like Niger. Thesimulation results suggest three policy lessons or rules ofthumb. When a resource price change is positive andtemporary, the best strategy is to save the revenue windfallin a sovereign fund, and use the interest income from thefund to raise citizens' consumption over time. Thisstrategy is preferred to investing in public capitaldomestically, even when private investment benefits from anenhanced public capital stock. Domestic investment raisesthe prices of domestic goods, leaving less money forgovernment to transfer to households; public investment isnot 100 percent effective in raising output. In the presenceof a negative temporary resource price change, however, thebest strategy is to cut public investment. This strategydominates other methods, such as trimming governmenttransfers to households, which reduces consumption directly,or borrowing, which incurs an interest premium as debtrises. In the presence of persistent (positive and negative)shocks, the best strategy is a mix of public investment andsaving abroad in a balanced regime that provides a naturalinsurance against both types of price shocks. Thecombination of interest income from the sovereign fund,transfers to households, and output growth brought about bypublic investment provides the best protective mechanism tosmooth consumption over time in response to changingresource prices.