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From Volatility to Stability in Expenditure: Stabilization Funds in Resource-Rich Countries

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  • Naotaka Sugawara
Abstract
This paper examines the effect of stabilization funds on the volatility of government expenditure in resource-rich countries. Using a panel data set of 68 resource-rich countries over 1988–2012, the results find that the existence of stabilization funds contributes to smoothing government expenditure. The spending volatility in countries that have established such funds is found to be 13 percent lower in the main estimation, and similar impacts are found in robustness tests. The analysis also shows that political institutions and fiscal rules are significant factors in reducing the expenditure volatility, while highlighting the roles of the size of economy, diversified exports, real sector management, and financial markets.

Suggested Citation

  • Naotaka Sugawara, 2014. "From Volatility to Stability in Expenditure: Stabilization Funds in Resource-Rich Countries," IMF Working Papers 2014/043, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/043
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    References listed on IDEAS

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    12. Hoda Youssef & Ibrahim Elbadawi & Raimundo Soto, 2018. "Sovereign Wealth Funds and Macroeconomic Stabilization in the Home Economy," Working Papers 1175, Economic Research Forum, revised 29 Mar 2008.
    13. Joseph E. Gagnon, 2014. "Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do," Policy Briefs PB14-17, Peterson Institute for International Economics.
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