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We examine the existing fiscal policy paradigm in commodity-exporting countries. First, we argue that its centerpiece—the permanent income hypothesis (PIH)—is not consistent with either intergenerational equity or long-term sustainability in the presence of uncertainty. Policies to achieve these goals need to be more prudent and better anchored than the PIH. Second, we point out the presence of a volatility tradeoff between government spending and wealth and re-assess long-held views on the appropriate fiscal anchors, the vice of procyclicality, and the (im)possibility of simultaneously smoothing consumption and ensuring intergenerational equity and sustainability. Finally, we propose what we call a prudent wealth stabilization policy that would be more consistent with long-term fiscal policy goals, yet relatively simple to implement and communicate.

Fiscal policy. --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Government policy --- Investments: Stocks --- Macroeconomics --- Public Finance --- Fiscal Policy --- Fiscal Policies and Behavior of Economic Agents: General --- Resource Booms --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy: Demand and Supply --- Prices --- National Government Expenditures and Related Policies: General --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Public finance & taxation --- Investment & securities --- Consumption --- Oil prices --- Expenditure --- Stocks --- Fiscal policy --- National accounts --- Financial institutions --- Economics --- Expenditures, Public --- United Arab Emirates

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This paper focuses on the coordination problem among borrowing countries imposing controls on capital infl ows. In a simple model of capital flows and controls, we show that inflow restrictions distort international capital flows to other countries and that, in turn, such capital flow deflection may lead to a policy response. We then test the theory using data on inflow restrictions and gross capital inflows for a large sample of developing countries between 1995 and 2009. Our estimation yields strong evidence that capital controls deflect capital flows to other borrowing countries with similar economic characteristics. Notwithstanding these strong cross-border spillover effects, we do not find evidence of a policy response.

Capital movements --- International trade --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Balance of payments --- Foreign exchange --- International finance --- Econometric models. --- Banks and Banking --- Exports and Imports --- International Investment --- Long-term Capital Movements --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- Finance --- Capital controls --- Capital inflows --- Real interest rates --- Capital outflows --- Financial services --- Interest rates --- South Africa

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Nearly all countries in the Middle East and Central Asia have pledged to contain greenhouse gas emissions as part of the Paris Agreement. The purpose of this paper is to identify the menu of fiscal policy options which would allow the region to fulfil its emissions reduction commitment. Specifically, the paper examines and estimates the tradeoff between two broad categories of fiscal policies: public investments in renewable sources of energy and measures that raise the effective price of fossil fuels. Such a dichotomy captures the key medium-term macroeconomic and long-term intergenerational trade-offs that are arguably the most pertinent for the countries in the Middle East and Central Asia where governments are likely to play a leading role in the low-carbon transition. At one end of this tradeoff, a gradual removal of all fuel subsidies and, in addition, a phased introduction of a carbon tax of $8 per metric-ton of CO2-equivalent in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and $4 in the Caucasus and Central Asia (CCA) over the next eight years could achieve the region’s 2030 emissions abatement goals without additional investments in renewables. T Alternatively, additional combined public investments of close to US$900 billion in renewable sources of energy between 2023 and 2030 would allow achieving the region’s emissions reduction targets with fuel subsidies reduced by two thirds and without any carbon tax. In practice, most countries are likely to choose a mix of these policies based on their individual circumstances. Importantly, the deployment of non-fiscal mitigation policies—such as tightening of environmental regulations, such as raising emissions standards, or incentivizing green private investments—could play an important role in reducing the required fiscal effort and improving the tradeoff described above. Global and regional initiatives to provide affordable financial support and technological assistance would be equally important in improving the region’s economic options. Regardless of the chosen strategy, delaying the rollout of mitigation policies would make achieving the emissions reduction targets more difficult and costly. Therefore, an early start will be essential to tread a smoother path toward a low-carbon future in the Middle East and Central Asia.

Fiscal policy. --- Environmental economics. --- Economics --- International agencies --- International Agreements and Observance --- International Economics --- International institutions --- International organization --- International Organizations --- Political Economy --- Political economy --- Public Policy

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Domestic revenue mobilization has been a longstanding challenge for countries in the Middle East and Central Asia. Insufficient revenue has often constrained priority social and infrastructure spending, reducing countries’ ability to reach the Sustainable Development Goals, improve growth prospects, and address climate related challenges. Moreover, revenue shortfalls have often been compensated by large and sustained debt accumulation, raising vulnerabilities in some countries, and limiting fiscal space to address future shocks. The COVID-19 pandemic and the war in Ukraine have compounded challenges to sustainable public finances, underscoring the need for revenue mobilization efforts. The recent global crises have also exacerbated existing societal inequalities and highlighted the importance of raising revenues in an efficient and equitable manner. This paper examines the scope for additional tax revenue mobilization and discusses policies to gradually raise tax revenue while supporting resilient growth and inclusion in the Middle East and Central Asia. The paper’s main findings are that excluding hydrocarbon revenues, the region’s average tax intake lags those of other regions; the region’s fragile and conflict-affected states (FCS) face particular challenges in mobilizing tax revenue; In general, there is considerable scope to raise additional tax revenue; countries have made efforts to raise tax collection, but challenges remain; tax policy design, notably low tax rates and pervasive tax exemptions, is an important factor driving tax revenue shortfalls; weak tax compliance, reflecting both structural features and challenges in revenue administration, also plays a role; and personal income tax systems in the region vary in their progressivity—the extent to which the average tax rate increases with income—and in their ability to redistribute income. These findings provide insights for policy action to raise revenue while supporting resilient growth and inclusion. The paper’s analysis points to these priorities for the region to improve both efficiency and equity of tax systems: improving tax policy design to broaden the tax base and increase progressivity and redistributive capacity; strengthening revenue administration to improve compliance; and implementing structural reforms to incentivize tax compliance, formalization, and economic diversification.

Taxation. --- Tax administration and procedure. --- Aggregate Factor Income Distribution --- Business Taxes and Subsidies --- Corporate & business tax --- Corporate income tax --- Corporate Taxation --- Corporations --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement --- Fiscal Policy --- Fiscal policy --- Income tax --- International Economics --- International institutions --- International organization --- International Relations and International Political Economy: Other --- Law and legislation --- Macroeconomics --- Personal Finance -Taxation --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Personal income tax --- Political economy --- Public finance & taxation --- Public Finance --- Public Policy --- Revenue administration --- Revenue --- Tax administration and procedure --- Tax administration core functions --- Tax Evasion and Avoidance --- Tax return filing compliance --- Taxation and Subsidies: Incidence --- Taxation --- Taxation, Subsidies, and Revenue: General --- Taxes --- Taxpayer compliance --- United Arab Emirates

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The Future of Oil and Fiscal Sustainability in the GCC Region.

Petroleum industry and trade --- Pétrole --- Industrie et commerce --- Arab countries. --- Saudi Arabia