Looking Beyond the Fiscal : Do Oil Funds Bring Macroeconomic Stability?

WPIEA2007096 Image
Price:  $18.00

Author/Editor: Ghiath Shabsigh, Nadeem Ilahi
Release Date: © April, 2007
ISBN : 978-1-45186-660-5
Stock #: WPIEA2007096
Stock Status: On back-order

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Oil funds have become increasingly popular in oil exporting countries during the recent surge in oil prices. However, the literature on the contribution is small, tends to focus narrowly on their fiscal benefits, and concludes that they are redundant of such funds-in other words, that well designed fiscal management and policy are adequate substitutes for oil funds. This paper argues that a broader focus is needed in judging the effectiveness of such funds. We test whether oil funds help reduce macroeconomic volatility. The econometric estimation results from a 30-year panel data set of 15 countries with and without oil funds suggest that oil funds are associated with reduced volatility of broad money and prices and lower inflation. However, there is a statistically weak negative association between the presence of an oil fund and volatility of the real exchange rate.


Economic policy , Economic stabilization , Fiscal policy , Inflation , Monetary policy

More publications in this series: Working Papers

More publications by: Ghiath Shabsigh ; Nadeem Ilahi