Commodity Shocks and Optimal Fiscal Management of Resource Revenue in an Economy with State-owned Enterprises

King Yoong Lim and Shuonan Zhang

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

Abstract: We present a dynamic model in which a resource-rich State allocates its resource revenue between a resource stabilization fund and investments in state-owned enterprises (SOEs). Despite being less productive efficient, SOEs' operation benefits from scale economies tied to the resource sector: its profitability is procyclical to commodity shocks. We identify analytically a threshold share of fiscal allocation to SOEs above which SOEs make non-zero profits. Based on a Bayesian-estimated model, we solve for an optimal resource revenue allocation between SOE investments and Resource Fund, and find the optimal share of SOE investment to be in the range of 9.0-12.9 percent.

Keywords: Commodity Shocks; Fiscal Management; Open-economy DSGE models; Resource Wealth; State-owned Enterprises. (search for similar items in EconPapers)
JEL-codes: E32 F41 H54 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-mac and nep-opm
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http://www.ntu.ac.uk/__data/assets/pdf_file/0036/983862/NBS_2020_02_full.pdf First version, 2020 (application/pdf)

Related works:
Journal Article: Optimal fiscal management in an economy with resource revenue‐financed government‐linked companies (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:nbs:wpaper:2020/02

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