Strategic Investment Decisions in Oil Exporting Economies: The Effect of Government Savings Rule
Hodjat Ghadimi

Oil exporting developing countries have the common problem of transforming their valuable but depletable natural resource into a permanent flow of income for the future. Any development plan for these economies first and foremost must deal with the issues related to the extraction of the exhaustible resource, optimal level of private and public savings, and investment allocation of the investment funds. The government plays a central role in these economies and its savings strategy is a major factor in determining economy-wide investment level. Notwithstanding its pivotal role, the government strives to achieve societal objectives within the more realistic environment of a mixed economy in which market also plays an important role. The aim of this article is to describe the optimal actions of the government within the environment of a market economy and specifically explore the impact of government savings rule that determine the strategic investment composition of the economy. The paper presents and discusses results from a simulation experiment from applying a dynamic computable general equilibrium model to a typical oil economy.

Full Text: PDF     DOI: 10.15640/smq.v3n3a2