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Price and Revenue Volatility: What Policy Options and Role for the State?

Price and Revenue Volatility: What Policy Options and Role for the State? Global Governance 17 (2011), 213–228 Price and Revenue Volatility: What Policy Options and Role for the State? Giacomo Luciani Price volatility is a major problem for all commodity exporters because it translates into direct or indirect volatility of government revenue. Should a developing country’s state be responsible for isolating the domestic economy from the consequences of fluctuating international commodity prices? This article argues that this is an essential function of the state and a crucial component of its legitimacy. Recently, the establishment of stabi- lization funds has been regarded as an essential component of good gov- ernance, notwithstanding the persistence of major problems. As an alternative, this article proposes the use of resource revenue for establish- ing endowments of autonomous public institutions with well-defined de- velopmental goals, or furnishing the equity for strategically important commercial corporations. The latter opens the door to an interesting per- spective on the potential path toward progressive democratization of the rentier states. KEYWORDS: price volatility, stabilization funds, democratic in- stitutions, financial policies, rentier states. Volatility of Commodity Prices and Development Price volatility is a major problem for all commodity producers in developing and developed countries alike. Price volatility is the result of rigidity of http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Global Governance: A Review of Multilateralism and International Organizations Brill

Price and Revenue Volatility: What Policy Options and Role for the State?

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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1075-2846
eISSN
1942-6720
DOI
10.1163/19426720-01702008
Publisher site
See Article on Publisher Site

Abstract

Global Governance 17 (2011), 213–228 Price and Revenue Volatility: What Policy Options and Role for the State? Giacomo Luciani Price volatility is a major problem for all commodity exporters because it translates into direct or indirect volatility of government revenue. Should a developing country’s state be responsible for isolating the domestic economy from the consequences of fluctuating international commodity prices? This article argues that this is an essential function of the state and a crucial component of its legitimacy. Recently, the establishment of stabi- lization funds has been regarded as an essential component of good gov- ernance, notwithstanding the persistence of major problems. As an alternative, this article proposes the use of resource revenue for establish- ing endowments of autonomous public institutions with well-defined de- velopmental goals, or furnishing the equity for strategically important commercial corporations. The latter opens the door to an interesting per- spective on the potential path toward progressive democratization of the rentier states. KEYWORDS: price volatility, stabilization funds, democratic in- stitutions, financial policies, rentier states. Volatility of Commodity Prices and Development Price volatility is a major problem for all commodity producers in developing and developed countries alike. Price volatility is the result of rigidity of

Journal

Global Governance: A Review of Multilateralism and International OrganizationsBrill

Published: Aug 12, 2011

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