Abstract
Many commodity-exporting countries saw their revenues plummet and experienced fiscal deficits during the pandemic. The economic rebound will restore resource exports/revenues and a new round of debate will be initiated on revenues utilization. Countries will decide either to internalize revenues or capitalize them with investments abroad. Our autoregressive distributed lag (ARDL) models provide evidence of the benefits Norway enjoys since it has not internalized revenues. The currency rate, long-term bond yields, and GDP growth are insulated from prices volatility. Furthermore, the country can absorb currency appreciations/devaluations and long-term credit rate hikes through government expenditure. However, monetary steering is favored in the long term (absorbs yield increases), while in the short run it can allow for speculative activities by credit investors. Countries should not internalize resource revenues to avoid experiencing decreased competitiveness and economic growth and increased credit rates. However, the temptation will be high enough since deficits and support packages cost a lot. This study also includes years of low prices. Thus, our research reveals the extent and limitations of diligent revenue management from a country considered as a role model.
Highlights
Resource exploitation has multiple benefits for the domestic economy [1], since total output, employment, and tax revenues rise. These benefits will be tempting to resourceexporting governments to internalize resource revenues after the COVID-19 pandemic
To understand the significance of the oil sector to Norway, we present the data for 2020 which designate more than 40% of Norwegian exports and 10% of GDP to come from petroleum [4]
We do not exaggerate potential benefits, while we present the limitations of diligent resource management
Summary
Resource exploitation has multiple benefits for the domestic economy [1], since total output, employment, and tax revenues rise. These benefits will be tempting to resourceexporting governments to internalize resource revenues after the COVID-19 pandemic. These benefits can well turn into economic vulnerabilities. Norway is the role model of effective resource management for many studies since it applied all of them. The country has acclamatory built resilience to oil price shocks [3]. Oil price shocks affect supply security and are affected by climate risk factors [6]. Diligent resource management might mitigate both energy security and energy transition issues by financing alternative energy generation [7]
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