Guidelines for exploiting natural resource wealth

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule, and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth. © The Author 2014. Published by Oxford University Press.
Original languageEnglish
Pages (from-to)145-169
JournalOxford Review of Economic Policy
Volume30
Issue number1
DOIs
Publication statusPublished - 2014

Fingerprint

natural resource
commodity price
political economy
income
Windfall
Domestic investment
Wealth
Natural resources
windfall
Sovereign wealth funds
Hartwick rule
Price volatility
Liquidity
Commodity prices
Buffer
Permanent income hypothesis
Political economy
Investment funds
Hotelling rule
Scarcity

Bibliographical note

PT: J; NR: 40; TC: 1; J9: OXFORD REV ECON POL; PG: 25; GA: AI7FZ; UT: WOS:000337051700008

Cite this

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abstract = "The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling rule, and the Hartwick rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth. {\circledC} The Author 2014. Published by Oxford University Press.",
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Guidelines for exploiting natural resource wealth. / van der Ploeg, R.

In: Oxford Review of Economic Policy, Vol. 30, No. 1, 2014, p. 145-169.

Research output: Contribution to JournalArticleAcademicpeer-review

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