Take-off Dynamics of a Sovereign Wealth Fund

Emilio Carnevali, Giacomo Corneo and Pierluigi Vellucci

No 22117, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A sovereign wealth fund can bring about broad participation in the financial gains of enterprises, especially AI-generated gains. But building such a fund takes time. This paper determines the waiting time necessary to build a fund of economically significant size, depending on the allotted fiscal resources and the macro-financial environment. As the fund’s returns are uncertain, its take-off is framed as a diffusion process. A backward Kolmogorov equation characterises the firstpassage probability of the fund-to-GDP ratio. Quantitative results on waiting time markedly differ from those obtained in a deterministic setup. Under a scenario that is plausible for mature economies, we find that a fund close to 30 percent of GDP can be established with high probability after twenty-four years.

Keywords: Sovereign wealth funds; Public wealth accumulation (search for similar items in EconPapers)
JEL-codes: C61 C63 D81 G11 H63 (search for similar items in EconPapers)
Date: 2026-11
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