Managing and Harnessing Volatile Oil Windfalls

Frederick (Rick) van der Ploeg and ,
Authors registered in the RePEc Author Service: Ton Stefan van den Bremer

No 9209, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Three funds are necessary to manage an oil windfall: intergenerational, liquidity and investment funds. The optimal liquidity fund is bigger if the windfall lasts longer and oil price volatility, prudence and the GDP share of oil rents are high and productivity growth is low. We apply our theory to the windfalls of Norway, Iraq and Ghana. The optimal size of Ghana?s liquidity fund is tiny even with high prudence. Norway?s liquidity fund is bigger than Ghana?s. Iraq?s liquidity fund is colossal relative to its intergenerational fund. Only with capital scarcity, part of the windfall should be used for investing to invest. We illustrate how this can speed up the process of development in Ghana despite domestic absorption constraints.

Keywords: Economic development; Ghana; Inefficiency; Intergenerational fund; Iraq; Liquidity fund; Norway; Oil price volatility; Precautionary buffers; Public investment (search for similar items in EconPapers)
JEL-codes: D91 E21 E22 Q32 (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Managing and Harnessing Volatile Oil Windfalls (2013)
Working Paper: Managing and Harnessing Volatile Oil Windfalls (2012)
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