Managing (Fiscally) Resource Windfalls : Exploring Policy Options for the Democratic Republic of Congo
How should resource-dependent countries respond (fiscally) to resource price volatility? This note studies what determines revenue allocation between a "spend today" strategy and a "save now-spend tomorrow" approach in the conte...
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| Language: | English en_US |
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World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/09/26819003/economic-premise--managing-fiscally-resource-windfalls-exploring-policy-options-democratic-republic-congo-economic-premise-managing-fiscally-resource-windfalls-exploring-policy-options-democratic-republic-congo http://hdl.handle.net/10986/25153 |
| Summary: | How should resource-dependent countries
respond (fiscally) to resource price volatility? This note
studies what determines revenue allocation between a
"spend today" strategy and a "save now-spend
tomorrow" approach in the context of the Democratic
Republic of Congo. It uses a three-sector model in which
public infrastructure investment has tangible benefits for
private production and investment while also being subject
to absorption constraints. The optimal allocation rule
between spending today and asset accumulation is calibrated
by minimizing a social loss function defined in terms of
household welfare (measured by consumption volatility) and
macroeconomic volatility (measured in terms of fiscal
volatility only, or a composite measure involving real
exchange rate volatility). The results indicate that, if
properly managed, a sovereign fund could contribute
significantly to macroeconomic stability in the Democratic
Republic of Congo. |
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