Abstract
Mineral-rich developing countries are increasingly using nonrenewable resource funds to deal commodity price volatility. Empirically, the effectiveness of sovereign oil funds (SOFs) in stabilizing fiscal revenue and macroeconomic volatility appears to be rather limited, although there has been some attempt at formal modeling in this regard. This paper attempts to build on this literature by analyzing several propositions regarding sovereign oil funds using panel data regressions. We determine the change in the volatility of consumer price index, broad money, real exchange rate and real government spending following the establishment of the sovereign oil funds. We are also evaluating the impact of the balance of the funds on the volatility of the macro variables, particularly the volatility of the government spending. To finalize our empirical research, we bring new lights to the change in the real GDP growth rate and real exchange rate after the establishment of the SOFs.
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