Dr. King Yoong Lim
Lecturer
Nottingham Business School, Nottingham Trent University
26 July 2019 (Friday) | 10.00am - 12.00pm | IKMAS Seminar Room
The National University of Malaysia
OPTIMAL FISCAL MANAGEMENT OF
RESOURCE WEALTH IN AN ECONOMY WITH STATE-OWNED ENTERPRISES:
A DSGE ANALYSIS
IKMAS Seminar Series No.10/2019
ABSTRACT
OPTIMAL FISCAL MANAGEMENT OF RESOURCE WEALTH IN AN ECONOMY WITH STATE-OWNED ENTERPRISES:
A DSGE ANALYSIS
Dr. King Yoong Lim, Lecturer
Nottingham Business School, Nottingham Trent University
Over the past 3 decades, policy prescription on fiscal management of resource revenue associated with the “natural resource curse” literature has progressed from the initial consensus of saving the entirety of resource windfall abroad (for consumption smoothing and precautionary buffer) to allocating some fraction domestically to finance infrastructure investments so as to address persistent infrastructure gaps.
However, in practice, resource rents spent domestically are often parked in entities known as sovereign funds, which finance state-owned enterprises (SOEs) operating in the domestic market. We develop a DSGE model in which the government of a resource-rich economy allocates its resource revenue between a Resource Fund abroad and investments in SOEs. Despite being less productive efficient, SOEs’
operation benefits from scale economies tied to the resource sector: its profitability is therefore procyclical to resource price shocks. The model is Bayesian-estimated to Malaysia, with the results suggesting a business cycle heavily influenced by resource shocks. We solve numerically for an optimal resource revenue allocation between SOE investments and Resource Fund, and find the present allocation to SOEs in Malaysia to be higher than the socially optimal level.
Dr. King Yoong Lim holds a PhD Economics (awarded with the prestigious President’s Doctoral Scholar medal) from the University of Manchester. He is currently a Lecturer in Economics with the Nottingham Business School, Nottingham Trent University. A three-time STC Consultant with the World Bank, he contributed to Malaysia’s Capital Market Masterplan 2, National Innovation Strategy (and its associated GLC Innovation Transformation Programme), and recently led the redevelopment of Kenya Revenue Agency’s revenue forecasting framework. His wide range of research interests includes applied development economics, economic growth, and industrial transformation & innovation strategies. To date, he has published in Macroeconomic Dynamics, Journal of Macroeconomics, Economic Modelling, New Zealand Economic Papers, and Singapore Economic Review. He is also the co-author of the policy-centric book, “Can Malaysia Achieve Innovation-led Growth?”
published by Khazanah Nasional in 2013.
