NATURAL RESOURCE FUNDS AND MACROECONOMIC STABILIZATION: EVIDENCE FROM RESOURCE-RICH COUNTRIES

Abstract

Motivation: The resource curse is a paradox of economic development often seen in resource-rich countries. A major contributing factor is these economies' reliance on the volatile global commodity market. To address this, many countries have established natural resource funds (NRF) to stabilize revenue. In recent years, the structure and number of such funds - especially in developing countries - have evolved significantly. However, existing research on their stabilization effectiveness remains inconclusive, signalling the need for further analysis.

Aim: This study aims to evaluate the effectiveness of NRF in performing their stabilization function in the context of counteracting the resource curse.

Results: A comprehensive empirical analysis was conducted, covering 49 resource-rich countries and 43 NRF over the period 2000–2023. A panel regression model was applied to assess the impact of these funds on macroeconomic stability. The analysis includes various dimensions, such as public and private expenditures, investment, macroeconomic performance, and trade conditions.

Results show that stabilization funds do not significantly impact the examined variables. In contrast, investment and savings funds exhibit stabilizing effects. Investment funds enhance domestic investment stability, while savings funds help stabilize government spending and terms of trade.

These outcomes indicate a shift in the role of resource funds. Traditional stabilization funds are losing relevance, whereas investment and especially long-term savings funds - often called future generations funds - are gaining prominence. This trend is reflected both in fund structures and founding years, as well as in the empirical findings of this study.