The Day After Tomorrow: Designing an Optimal Fiscal Strategy for Libya

• Authors: Caceres Carlos , Cevik Serhan , Fenochietto Ricardo , Gracia Borja
• Languages of publication: EN

Abstracts

EN

Libya is highly dependent on exhaustible and volatile hydrocarbon resources, which constitute the bulk of government revenues. Although resource wealth provides the means to promote socio-economic development, procyclical fiscal policies threaten macroeconomic stability as well as fiscal sustainability and intergenerational equity. This paper provides an assessment of the cyclically adjusted fiscal stance, analyzes fiscal sustainability according the permanent income framework, and simulates various fiscal policy rules with the objective of developing a rulebased fiscal strategy that would delink the economy from oil price fluctuations, improve the management of resource wealth, and safeguard macroeconomic stability. The empirical results suggest that an “enhanced” structural fiscal balance rule would provide the strongest anchor for policymaking, accommodating for output and/or commodity price shocks, though at the cost of relative complexity.

Keywords

EN

Fiscal policy; fiscal sustainability; fiscal rules; natural resources; public financial; management

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Journal of Banking and Financial Economics
• Year: 2015
• Issue: 2(4)
• Pages: 32-50

Dates

online

2015-07-16

Contributors

author

Caceres Carlos

• International Monetary Fund, U.S.A.

author

Cevik Serhan

• International Monetary Fund, U.S.A.

author

Fenochietto Ricardo

• International Monetary Fund, U.S.A.

author

Gracia Borja

• International Monetary Fund, U.S.A.

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Identifiers

ISSN

2353-6845

DOI

10.7172/2353-6845.jbfe.2015.2.3