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This paper analyzes and tests the influence of political instability on economic vulnerability in the context of the 1994 and 1997 crises episodes. It constructs four political variables that aim at quantifying political instability. The paper finds that for countries with weak economic fundamentals and low reserves, political instability has a strong impact on economic vulnerability. The estimation results suggest that including political variables in economic models does improve their power to explain and predict economic crises. The paper concludes that countries are more economically vulnerable during and especially following election periods, and when election results are less stable than at other times.

Financial Risk Management --- Foreign Exchange --- Natural Resources --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Financial Crises --- Nonrenewable Resources and Conservation: General --- Currency --- Foreign exchange --- Economic & financial crises & disasters --- Environmental management --- Real exchange rates --- Exchange rate arrangements --- Financial crises --- Exchange rates --- Non-renewable resources --- Environment --- Natural resources --- Mexico

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This Selected Issues paper examines recent economic developments in Sierra Leone. The paper highlights that the economic recovery in Sierra Leone has benefited especially from the extensive rehabilitation and humanitarian activities in liberated areas. Real GDP growth rose by 4 percent in 2000 and accelerated further in 2001 and 2002. The paper lays out some conceptual issues for the analysis of government debt sustainability, and discusses key issues related to long-term fiscal sustainability. The challenges ahead for rehabilitating Sierra Leone’s mining sector are also examined.

Macroeconomics --- Public Finance --- Natural Resource Extraction --- Natural Resources --- Industry Studies: Primary Products and Construction: General --- Debt --- Debt Management --- Sovereign Debt --- Nonrenewable Resources and Conservation: General --- Fiscal Policy --- Extractive industries --- Public finance & taxation --- Environmental management --- Mining sector --- Public debt --- Non-renewable resources --- Fiscal stance --- Domestic debt --- Economic sectors --- Environment --- Fiscal policy --- Mineral industries --- Debts, Public --- Natural resources --- Sierra Leone

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This paper suggests that it is essential to save a substantial portion of mineral revenues now to ensure fiscal sustainability for a post-diamond period. Taking the non-mineral primary balance into account can help clarify desirable fiscal policies. Botswana’s real effective exchange rate is broadly in line with economic fundamentals and consistent with external sustainability, indicating no threat to external stability. Export performance and other indicators suggest a number of structural competitiveness obstacles that could explain the low labor productivity and poor export and export diversification outcomes.

Exports and Imports --- Foreign Exchange --- Insurance --- Macroeconomics --- Natural Resources --- Nonrenewable Resources and Conservation: General --- Current Account Adjustment --- Short-term Capital Movements --- Insurance Companies --- Actuarial Studies --- Trade: General --- Currency --- Foreign exchange --- International economics --- Environmental management --- Insurance & actuarial studies --- Non-renewable resources --- Current account --- Real effective exchange rates --- Real exchange rates --- Environment --- Balance of payments --- Financial institutions --- Natural resources --- Exports --- Botswana

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Exporters of exhaustible resources have historically exhibited higher income volatility than other economies, suggesting a heightened role for precautionary savings. This paper uses a parameterized small open economy model to quantify the role of precautionary savings in economies with exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. Results show that the precautionary motive can generate sizable external sector savings. When aggregated over the sample countries, precautionary savings in 2006 add up to 3.2 percent of GDP. The quantitative importance of the precautionary motive varies considerably across the sample countries and is driven primarily by the weight of exhaustible resource revenues in future income. The parameterized model fares well at capturing current account balances in both cross-section and time-series data.

Business & Economics --- Economic History --- Saving and investment --- Nonrenewable natural resources --- Mathematical models. --- Econometric models. --- Non-renewable natural resources --- Exhaustible resources --- Natural resources, Nonrenewable --- Economic aspects --- Natural resources --- Exports and Imports --- Macroeconomics --- Natural Resources --- Nonrenewable Resources and Conservation: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Current Account Adjustment --- Short-term Capital Movements --- Environmental management --- International economics --- Non-renewable resources --- Precautionary savings --- Current account --- Consumption --- Current account balance --- Balance of payments --- Economics --- Norway

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The paper discusses options available to tax mineral extraction projects particularly in developing countries. A desirable government share of the economic rent generated from mineral extraction can be achieved through different tax and non-tax instruments. This gives some room to design a fiscal regime that will be attractive to investors while providing the government with a fair share of the economic rent. However, achieving this will require a careful assessment of the appropriate distribution of risk and reward between the investor and the government. Moreover, there is growing pressure on countries to provide increasingly lenient fiscal terms so as to remain competitive as global investment destinations.

Taxation --- Corporate Taxation --- Natural Resources --- Business Taxes and Subsidies --- Mining, Extraction, and Refining: Hydrocarbon Fuels --- Mining, Extraction, and Refining: Other Nonrenewable Resources --- Nonrenewable Resources and Conservation: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Public finance & taxation --- Environmental management --- Corporate & business tax --- Resource rent tax --- Non-renewable resources --- Production sharing --- Income and capital gains taxes --- Corporate income tax --- Taxes --- Environment --- Natural resources --- Oil and gas leases --- Income tax --- Corporations --- United States