Public Investment in Resource-Abundant Developing Countries
Andrew Berg (),
Shu-Chun Yang () and
IMF Economic Review, 2013, vol. 61, issue 1, 92-129
Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax mobilization problems. This paper develops a dynamic stochastic model to analyze the macroeconomic effects of investing resource revenues, making explicit the role of public investment inefficiency, absorptive capacity constraints, Dutch disease, and financing needs to sustain capital. Revenue exhaustibility raises medium-term issues of how to sustain capital built during a windfall, while revenue volatility raises short-term concerns about macroeconomic instability. Using the model, country applications show how combining public investment with a resource fund—a sustainable investing approach—can address the problems associated with exhaustibility and volatility. The applications also demonstrate how the model can be used to determine the appropriate magnitude of the investment scaling-up (accounting for the financing needs to sustain capital) and the adequate size of a stabilization fund (buffer).
References: Add references at CitEc
Citations View citations in EconPapers (38) Track citations by RSS feed
Downloads: (external link)
http://www.palgrave-journals.com/imfer/journal/v61/n1/pdf/imfer20131a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/imfer/journal/v61/n1/full/imfer20131a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.
Working Paper: Public Investment in Resource-Abundant Developing Countries (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:61:y:2013:i:1:p:92-129
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2
Access Statistics for this article
More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Series data maintained by Sonal Shukla ().