Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon Daniel Leigh

ISBN: 9786613820709

Published: August 1st 2006

ebook

30 pages


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Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon  by  Daniel Leigh

Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon by Daniel Leigh
August 1st 2006 | ebook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, ZIP | 30 pages | ISBN: 9786613820709 | 7.12 Mb

While models based on Friedmans (1957) permanent-income hypothesis can provide oilproducing countries with long-run fiscal targets, they usually abstract from short-run costs associated with consolidation. This paper proposes a model that takes suchMoreWhile models based on Friedmans (1957) permanent-income hypothesis can provide oilproducing countries with long-run fiscal targets, they usually abstract from short-run costs associated with consolidation.

This paper proposes a model that takes such adjustment costs (or habits) into account. Further operational realism is added by permitting differential interest rates on sovereign debt and financial assets. The approach is applied to Gabon, where oil reserves are expected to be exhausted in 30 years.

The results suggest that Gabons current fiscal-policy stance cannot be maintained, while the presence of habits justifies smoothing the bulk of the adjustment toward the sustainable level over three to five years.



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