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Oil Exporters’ Dilemma: How Much to Save and How Much to Invest

Reda Cherif and Fuad Hasanov

World Development, 2013, vol. 52, issue C, 120-131

Abstract: Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data in the 2000s, precautionary saving is sizable and the marginal propensity to consume out of permanent shocks is below one, in stark contrast to the predictions of the perfect foresight model. The optimal investment rate is high if productivity in the tradable sector is high enough.

Keywords: oil exporters; fiscal policy; volatility; investment; precautionary saving; buffer-stock (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:52:y:2013:i:c:p:120-131

DOI: 10.1016/j.worlddev.2013.06.006

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