Fiscal Sustainability, Public Investment, and Growth in Natural Resource-Rich, Low-Income Countries: The Case of Cameroon
36 Pages Posted: 27 Jun 2013
Date Written: June 2013
This paper assesses the implications of the use of oil revenue for public investment on growth and fiscal sustainability in Cameroon. We develop a dynamic stochastic general equilibrium model to analyze the effects of such investment on growth and on the path of key fiscal indicators, such as the non-oil primary deficit and public debt. Policy scenarios show that Cameroon’s large infrastructural needs and relatively low current debt levels could justify a temporary deviation from traditional policy advice that suggests saving part of the oil revenue to smooth expenditure over time. Model simulations show that a relatively high degree of efficiency of public investment is needed for scaled-up public investment to make a significant contribution to growth, while maintaining fiscal sustainability.
Keywords: Fiscal sustainability, Cameroon, Economic growth, Oil revenues, Fiscal policy, Public investment, Natural resources, Low-income developing countries, Economic models, fiscal policy, fiscal policy, DSGE, natural resource-rich countries, low-income countries, public investment, growth., fiscal sustainability, public debt, government spending, primary deficit, budget constraint, fiscal adjustment, public spending, tax rates, fiscal reaction function, fiscal reaction, public investment spending, fiscal policies, fiscal stance, primary expenditure, fiscal outcomes, fiscal revenue, revenue collection, capital expenditure, fiscal performance, tax base, government revenue, budget process, fiscal rul
JEL Classification: C11, C15, C61, E22, E23, E27, H61, O11
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