Journal Article

Managing Oil Price Risk in Developing Countries

Julia Devlin and Sheridan Titman

in The World Bank Research Observer

Published on behalf of World Bank

Volume 19, issue 1, pages 119-139
Published in print March 2004 | ISSN: 0257-3032
Published online March 2004 | e-ISSN: 1564-6971 | DOI: http://dx.doi.org/10.1093/wbro/lkh015
Managing Oil Price Risk in Developing Countries

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This article presents a simple framework for understanding the impact of oil dependence on growth in terms of an optimal savings and investment strategy. Among the more important factors underlying this strategy is the extent to which oil price changes are temporary or permanent. This in turn determines whether a country should rely on stabilization and savings funds or the use of financial instruments to manage oil revenues—or both. Country experiences with stabilization and savings funds are surveyed, and the case is presented for using financial instrument to manage oil price risk. Policy implications for enhancing the use of financial instruments are explored, including an expanded role for international financial institutions.

Journal Article.  0 words. 

Subjects: Development Planning and Policy

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