Template-Type: ReDIF-Paper 1.0
Author-Name: King Yoong Lim
Author-Name: Shuonan Zhang
Title: Commodity Shocks and Optimal Fiscal Management of Resource Revenue in an Economy with State-owned Enterprises
Abstract: We present a dynamic model in which a resource-rich State allocates its resource revenue between a resource stabilization fund and investments in state-owned enterprises (SOEs). 
Despite being less productive efficient, SOEs' operation benefits from scale economies tied to the resource sector: its profitability is procyclical to commodity shocks. 
We identify analytically a threshold share of fiscal allocation to SOEs above which SOEs make non-zero profits. Based on a Bayesian-estimated model, we solve for an optimal resource revenue allocation between SOE investments and Resource Fund, and find the optimal share of SOE investment to be in the range of 9.0-12.9 percent.
File-URL: http://www.ntu.ac.uk/__data/assets/pdf_file/0036/983862/NBS_2020_02_full.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Creation-Date: 2020-02
Classification-JEL: E32, F41, H54.
Keywords: Commodity Shocks, Fiscal Management, Open-economy DSGE models, Resource Wealth, State-owned Enterprises.
Handle: RePEc:nbs:wpaper:2020/02