Kiel Working Papers, Kiel Institute for World Economics
No 1518:
Managing Future Oil Revenues in Ghana - An Assessment of Alternative Allocation Options
Clemens Breisinger, Xinshen Diao, Rainer Schweickert and Manfred Wiebelt
Abstract: Contemporary policy debates on the macroeconomics of
resource booms often concentrate on the short-run Dutch disease effects of
public expenditure ignoring the possible long-term effects of alternative
revenue-allocation options and the supply-side impact of royalty-financed
public investments. In a simple model applied here, the government decides
the level and timing of spending out of resource rents. This model also
considers productivity spillovers over time, which may exhibit a sector
bias toward domestic production or exports. A dynamic computable general
equilibrium model is used to simulate the effect of temporary oil revenue
inflows to Ghana. The simulations show that beyond the short-run Dutch
disease effects, the relationship between windfall profits, growth and
households’ welfare is less straightforward than what the simple model of
the "resource curse" suggests. The CGE model results suggest that designing
a rule to smoothing in and out of oil revenues between productivity
enhancing investments and an oil fund is crucial to achieving both shared
growth and macroeconomic stability
Keywords: oil fund, public expenditures, growth, productivity spillovers, Ghana, CGE analysis; (follow links to similar papers)
JEL-Codes: H4,; O5; (follow links to similar papers)
21 pages, May 2009
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