Riding the Boom: How should monetary and fiscal policy manage natural resource wealth?

Lead Research Organisation: University of Oxford
Department Name: Economics

Abstract

Natural resource discoveries are usually accompanied by optimism and excitement. After the 2007 discovery of offshore oil, Ghana's President John Kufour said "with oil as a shot in the arm, we're going to fly". However, this excitement is not always well placed. The existence of a "resource curse" is now well established in academic literature, describing the systematically lower growth of countries with natural resources than those without. This curse has already been witnessed in countries around the world, from Nigeria to Venezuela. It will also become increasingly important as the industrialisation of the developing world boost demand for commodities, and new deposits are discovered in countries without the institutional structure to cope with them. This project will consider how fiscal and monetary policy can address the resource curse, and improve the quality of life and economic prospects in resource rich countries around the world.

Countries that have recently discovered natural resources would do well to heed the experiences of the tiny island nation of Nauru. During the 1980s it was the richest nation in the world by GDP per capita. Now that the boom is over the country has been consigned to a future of dependence on regional neighbours by the dual ravages of economic mismanagement and environmental degradation. As a child growing up in Nauru I quickly learned of how the barren interior of the island had been shaped by phosphate mining. My early experiences in Nauru planted the seeds of my inquiry into the resource curse. A desire for other countries not to repeat the same mistakes has nurtured my focus.

This project will investigate what governments and central banks can do to avoid the resource curse. Existing academic work has focused on the long run question of whether resource wealth should be spent or saved, and has successfully shaped policy around the world. This project focuses on the short run question of how to manage an economy's adjustment to a resource discovery. It will be based around four papers: two on monetary policy and two on fiscal policy. Paper 1 asks if an actively managed currency can be an additional monetary tool when parts of an economy respond differently to a resource windfall. Paper 2 considers whether active monetary policy may be possible in developing countries without credit markets, by actively manipulating the currency. Paper 3 investigates how sovereign wealth funds should be coordinated with existing foreign currency reserves. Paper 4 asks whether resource revenues would be better used for cutting distortionary taxes, rather than investing domestically or saving abroad.

The project will use rigorous techniques at the forefront of macroeocnomic modelling, called "dynamic stochastic general equilibrium" (DSGE) models. These techniques allow us to address previously unanswered questions linking the behaviour of people and firms at a small scale to broad macroeconomic aggregates. This project will make a theoretical contribution by relaxing some commonly used but empirically unsupported assumptions on capital markets and taxation. In this way it may serve as a basis for future work by other researchers.

This research will be conducted at the University of Oxford. It will benefit from its position at the forefront of research into natural resource management at the Oxford Centre for the Analysis of Resource Rich Economies (OxCarre). It will also benefit from the mentorship of Professor Simon Wren-Lewis, who has extensive experience in policy-focused research employing the latest DSGE techniques.

Finally, this project will engage actively with researchers and policymakers around the world. To ensure academic insight this project will involve training at summer schools and visits to leading academics in the field. To ensure policy relevance the project will engage directly with fiscal and policymakers in both developed and developing countries.

Planned Impact

This project is designed to improve fiscal and monetary policy in resource-rich countries. As a result it will directly impact governments and central banks in these countries: both developing and developed. The research will also directly impact the work of international and non-governmental organisations that advise these policymakers. Beyond the direct impact, this work will indirectly contribute to the welfare of businesses and households in resource-rich countries by promoting sound macroeconomic management.

a. Monetary policymakers in resource-rich countries
Monetary policymakers will benefit from the work in papers 1 and 2. Paper 1 will consider alternative policy tools for managing parts of an economy that are responding differently to natural resources. This will benefit policymakers in developed countries as it relies on a well-operating conventional monetary transmission mechanism. An example is Australia, where cross-country labour rigidities mean the western states are booming while the east coast stagnates. It may also benefit monetary policy in other developed countries considering unconventional policy tools, such as the UK's interest in quantitative easing and the Funding for Lending scheme. Paper 2 will consider the conduct of monetary policy when conventional transmission channels are not effective. This will be of significant interest to policymakers in developing countries. Due to the need for stable monetary policy, the recommendations from these papers are likely to impact policy in the medium to long term.

b. Fiscal policymakers in resource-rich countries
This group will benefit primarily from papers 3 and 4. Paper 3 will provide insight into how to co-ordinate central bank reserves and sovereign wealth funds. This will be advantageous to resource rich-developed countries with sovereign wealth funds, such as Norway and the United Arab Emirates. Fiscal policymakers will also benefit from paper 4 through its exploration of whether resource wealth should be saved or spent on tax cuts. This paper will determine which taxes should be cut, and when this should be done. The recommendations from these papers would impact fiscal policy in the short to medium term, as the issues covered are currently under active consideration.

c. International and non-government organisations
International and non-government organisations which advise national policymakers will also directly benefit from this project. This will come from improving our understanding of policies available to resource-rich countries, by rigorously analysing options using cutting edge. Such benefits would extend to UK-based organisations such the International Growth Sector, the Natural Resources Charter, the DFID, and many firms listed on the UK Stock Exchange, all of which all have exposure to developing countries. These organisations are likely to benefit from this project in the short to medium term, as some topics are currently under active consideration.

d. Businesses and households in resource-rich countries
Ultimately the major beneficiaries of this project will be the people and businesses of resource-rich countries, and those who interact and trade with them. This will come from improved macroeconomic policy, founded in rigorous economic analysis. Such policies will reduce unemployment and promote faster and more stable economic growth, both of which have a major impact on people's overall happiness.
 
Description Humanity has relied on natural resources for millennia, but we still do not know how to manage them. This is important, with resources dominating one quarter of the world's economies, covering 1.4 billion people. It will continue to be as new technology, such as fracking, and new issues, such as climate change, provide new challenges. This project aimed to understand how monetary and fiscal policy should be used to manage natural resources. It has met this objective, contributing to nine papers at various stages of completion. All of them add to our understanding of how natural resources should be managed but, as is naturally the case with research, some of the contributions were not foreseen back in 2013. Below I list the papers, grouped by subject.

1. Fiscal Policy:

The first, and most significant, achievement of the grant was the paper "The Elephant in the Ground: Managing Oil and Sovereign Wealth", with Ton van den Bremer and Rick van der Ploeg. This addresses one of the biggest issues in international finance in recent years: the rapid emergence of sovereign wealth funds. In the last twenty years the number of funds has risen from nineteen to seventy-three and they are now worth over $6 trillion. We show that such funds are investing in the wrong assets, are spending the proceeds incorrectly and develop recommendations that are a significant improvement. The paper begins by making an important theoretical contribution, uniting three large and distinguished literatures for the first time: the Nobel prize-wining work on portfolio allocation (Merton, 1971), optimal resource extraction (Hotelling, 1931) and precautionary savings (Leland, 1968). The paper then uses the theory to make policy recommendations for Norway: the largest fund which holds over 2% of every stock in the world. This paper formed the basis for policy advice to the Norwegian Ministry of Finance, Norges Bank, the Saudi Arabian Monetary Authority and the Stroock Forum on sovereign wealth funds. The impact of this advice is outlined in the "Narrative Impact" section of this report. It is now published in the European Economic Review.

The second paper is "Resource funds: stabilizing, parking and intergenerational transfer" with Tony Venables. The paper explores fiscal strategies for managing natural resource revenues in developing countries, focusing on the balance between domestic and foreign asset accumulation. It suggests that domestic asset accumulation is the priority for low-income countries, while there are three motives for accumulating foreign assets; inter-generational transfer, parking funds, and stabilisation. The paper argues that the first of these is inappropriate for low income countries. The second is required if it is difficult to absorb extra spending in the domestic economy and takes time to build up domestic investment. The third is important, and depends on the extent to which the economy has other ways of adjusting to shocks. This paper was presented in the plenary session of the AERC Biannual Conference in Arusha, Tanzania in 2015 and is now published in the Journal of African Economies.

The third paper is "Sovereign wealth funds and natural resource management in Africa", with Lemma Senbet and Witness Simbanegavi. This article was the Editor's Assessment of a special issue of the Journal of African Economies, on which I was a Guest Editor. The issue included my paper with Tony Venables (above), as well as two others. It takes the findings from all three papers, combines them and considers how they are relevant for African policymakers in practice. It is now published in the Journal of African Economies.

The fourth paper is "Seven principles for managing natural resource wealth". This paper studies how capital-scarce countries should manage volatile resource income. Existing literature recommends that capital-scarce countries invest domestically, but that volatile resource income should be saved in a foreign sovereign wealth fund. I reconcile these by combining a stochastic model of precautionary savings with a deterministic model of a capital-scarce resource exporter. I show that capital-scarce countries should still establish a Volatility Fund, but it should be relatively smaller than in capital-abundant countries. The fund should be built before anticipated windfalls, partially invested domestically, and used as a source of income rather than a buffer against temporary shocks. To do so I develop a parsimonious framework that nests a variety of existing results as special cases, which are presented in seven principles. The first three apply to capital-abundant countries: i) Smooth consumption using a Future Generations Fund; ii) Build a Volatility Fund quickly, then leave it alone; and iii) Invest to stabilise the real exchange rate. The remaining four apply to capital-scarce countries: iv) Finance consumption and investment with oil; v) Use a temporary Parking Fund to improve absorption, vi) Invest part of the Volatility Fund domestically; and vii) Support private investment.

2. Monetary policy:

The fifth paper, "Optimal monetary responses to news of an oil discovery", addresses our lack of understanding on how resource exporters should conduct monetary policy. While there is extensive work on monetary policy in oil importers, like the US, little has been done on oil exporters. This paper is one of the first to address the shortfall, using the major advances in macroeconomic modelling over the past 20 years. I first show that foreign oil income gives the central bank an incentive to manipulate the terms of trade. This makes central bank credibility crucial: if it isn't then the manipulation will severely reduce welfare. In that case pegging would be a better option, which is done in practice by 74% of resource-exporters. I then show that when oil is discovered a standard Taylor rule is close to optimal policy, if it properly takes into account the way oil changes potential output in the economy. If not there is the potential for inflation and a recession. I have presented the paper to monetary policymakers in Australia, New Zealand and Norway. Now I am adding some empirical analysis to complement the paper's theoretical core, and so far results look promising.

The sixth paper is "Why Do So Many Oil Exporters Peg Their Currency? Foreign Reserves as a De-facto Sovereign Wealth Fund", with Rick van der Ploeg. This paper was commissioned for an IMF conference and is still preliminary. It argues that implementing a currency peg, which is very popular in resource-exporters, typically requires foreign reserves to be accumulated. These reserves can act as a de-facto sovereign wealth fund. Next steps include showing how such a peg can be used to tie the hands of governments, and force oil revenues to be saved abroad.

The seventh paper is "An empirical sectoral model of unconventional monetary policy: the impact of QE", with James Cloyne, Ryland Thomas and Alex Tuckett. This does not focus on resource-rich countries specifically, but does study the most important development in monetary policy since the 2008 financial crisis: the widespread introduction of quantitative easing. It empirically studies how QE affected the UK economy, and finds that the bank lending channel is particularly important. This paper was an extension of work conducted while I was visiting the Bank of England and the model now forms part of the Bank of England's suite of models that are used to inform Monetary Policy Committee decisions. It is published in the journal "The Manchester School".

3. Empirical studies of the effect of natural resources on growth:

The final two papers were unanticipated, but contribute to the grant's core purpose of understanding how natural resources should be managed. I pursued these ideas because they helped me developed my empirical skills, which were a gap in my toolkit, and they allowed me to use some cutting-edge geo-spatial data from satellite images.

The eighth paper is "Left in the Dark? Oil booms and rural poverty" with Brock Smith. This paper shows that oil booms do not benefit the rural poor. To show this we combine data on night-time lights and population at a very fine (1 km2) resolution to construct global measures of rural poverty from 2000-2013. We find that oil booms, due either to high prices or new discoveries, increase GDP per capita. However, the increase in output is limited to cities and towns, and does not benefit the rural poor. We also find that while urbanization is occurring throughout the developing world, it is not being hastened by oil wealth. As well as academic interest we hope that this new way of measuring and targeting poverty is useful to international organisations like the UN, World Bank and IMF, and charities like GiveDirectly, which we have been in touch with. The paper has also been extensively covered in print and radio media, as discussed in the Narrative Impact section. It is currently under review at a journal.

The ninth paper is "Natural Assets: Surfing a Wave of Economic Development"; with Thomas McGregor. This paper addresses the question of how natural resources affect the location and pace of economic growth. This has been studied for natural assets that contribute directly to economic activity, like ports, rivers, farmland, minerals and oil. However, it has not been studied for "non-market" resources or "natural amenities". We study this in three natural experiments which exploit detailed variation in the quality of surf breaks. Measuring the quality of surf breaks using a unique online database, and combining it with satellite images of night-time lights, we find that areas with high-quality breaks grow considerably faster than those with low quality ones. We also find that lights grow rapidly after a break is "discovered" by surfers, and they grew rapidly in cold-water surfing locations after the battery-heated wetsuit was invented in 2007. Growth is even faster in years with good waves, proxied by the El Nino weather phenomenon. This work is useful from an academic standpoint, and may also be directly useful for the surf industry in conducting cost-benefit analyses. The paper has been extensively been covered by print and radio media, and is about to be submitted to a journal.
Exploitation Route The papers on mining revenues, sovereign wealth funds and fiscal policy (papers 1-4 in the Key Findings section), are highly relevant for governments and fund managers in the 27 countries with commodity sovereign wealth funds. The research has already informed policy in Norway (see Narrative Impact), and this may spread to other countries in the near future. It is also relevant to international organisations like the World Bank and IMF, as well as NGOs like the Natural Resource Governance Institute and the International Forum of Sovereign Wealth Funds, which advise policymakers around the world. Finally, it is also relevant for academics interested in the field who may extend the analysis.

The papers on monetary policy (papers 5-7) are highly relevant for policymakers in central banks, and the international organisations that advise them (e.g. the IMF and the Bank for International Settlements). I have presented this research to policymakers at the Australian, New Zealand and Norwegian central banks, and it would be relevant for many others in resource-rich countries. I also use this research to inform policy advice I gave to the World Bank on Uganda's monetary policy after discovering oil.

The paper on measuring poverty using satellites (8) develops a method for measuring poverty that is faster, cheaper and more regular than existing survey-based methods, and is also relatively accurate. This would is useful for any charities or international organisations that are looking to help reduce poverty, or that must target services to the world's poorest, such as the World Bank, Oxfam, GiveDirectly. It might also be helpful for governments in developing countries to know where they should focus their investment in public infrastructure.

The paper on the economic impacts of surfing provides a novel way to put a dollar value on natural amenities. This would be relevant for the UN's System of Environmental and Economic Accounting, which aims to include the value of natural assets in national accounting frameworks to improve the ways they are managed. The paper is also directly relevant for the multi-billion dollar surfing industry, as the valuations can be used to help surfers make the case that their waves should be protected. The paper includes specific examples of surf breaks being destroyed by coastal roads and river-dredging, which ostensibly should have increased economic activity but actually did the opposite. There has also been an emergence of artificial surf breaks, and this paper might help local policymakers evaluate the positive economic spill-overs of such amenities.
Sectors Energy,Environment,Financial Services, and Management Consultancy,Government, Democracy and Justice

URL http://samuelwills.wordpress.com/
 
Description This project has had a considerable impact on natural resource policy internationally. These impacts include informing Norway and Saudi Arabia's recent changes to their sovereign wealth fund portfolio; advising the governments of Libya and Uganda in collaboration with the World Bank; conducting commissioned research for the IMF; presenting work to the Central Banks of Norway, New Zealand and Australia; speaking to a variety of audiences and politicians in the Australian Labor Party; publishing articles in policy journals; extensive media engagement and presenting my work at a large number of academic conferences. Further information on all these impacts, and links to material, can be found on my website www.samuelwills.wordpress.com. Research funded by this grant helped to inform recent changes to Norway's sovereign wealth fund portfolio. In the paper "The Elephant in the Ground: Managing Oil and Sovereign Wealth" we recommend that commodity sovereign wealth funds: i) Diversify away from commodities below the ground in their financial portfolios above the ground, to spread their risk; ii) Increase the share of equities (relative to bonds) in their above-ground portfolio as commodities are extracted and their subsoil risk exposure falls; iii) Spend a decreasing share of their financial portfolio as it comprises a larger share of total wealth. The paper had a particular focus on Norway, as the world's largest sovereign wealth fund with ~USD 900 billion in assets under management. We presented our findings to the Norwegian Ministry of Finance twice (2013, 2014), the Norges Bank (2014), and to academic audiences in Norway which included future members of government commissions (2013, 2014, 2016). The impact is that Norway has decided to divest coal from its portfolio, and is considering doing the same for oil (finding i). In 2016 a government commission also recommended that Norway's fund increase its equity share from 60-70%, which amounts to an asset allocation worth ~USD 90 billion (finding ii). These policy changes are all consistent with the recommendations of our research. They also established a government commission to look into changing their fiscal rule (finding iii), but they have no plans to yet. I also provided expert advice based on this research to a Harvard Belfer Centre report on Saudi Arabia's sovereign wealth fund, run by the former Director of the Investment Management Department at the Saudi Arabian Monetary Authority. I outlined the merits of establishing a fund and the principles that should be considered when designing them. Since the report Saudi Arabia has changed their policy from holding over US$2 trillion in foreign currency reserves, to a more diversified sovereign wealth fund portfolio. The report is available on my website. This research also formed the basis for policy advice given at the Stroock Sovereign Wealth Fund forum in Jackson Hole, WY in August 2016. The small audience of less than 100 included US State Governors and Treasurers from Alabama, Alaska, North Dakota and Wyoming; Sovereign Wealth Fund CEOs from Alaska, Alberta, New Mexico and New Zealand, the President of the Federal Reserve Bank of Kansas, and senior representatives from businesses, NGOs and international organisations including the former Vice President of the World Bank. In addition, I also presented at an open public forum and was interviewed by media, both of which were broadcast on Wyoming PBS television. The impact was a change in perspective of a number of audience members, and it may lead to future advisory work. Links to a recording of the public forum and a television interview are available on my website. Research funded by this grant laid the foundation for a report advising the World Bank and the Government of Libya on how to manage their oil revenues in 2014. This involved building a small general equilibrium model. I recommended slowly investing the revenues in domestic capital, making use of a temporary offshore "Parking fund" while absorption constraints are alleviated. The report and associated model were handed over to the World Bank and the Libyan Ministry of Finance in 2014. In 2014 I also advised the World Bank and the Government of Uganda on managing oil revenues, in work that ultimately ended up in the 2016 World Bank Country Economic Memorandum (CEM) on Uganda. I focused on monetary policy, arguing that they should reconsider the move towards monetary union as the oil revenues will place it under considerable strain. My involvement followed from an article I had syndicated in 11 languages through Project Syndicate on the East African Monetary Union. The CEM, my background reports and the original Project Syndicate article are available on my website. In 2014 I conducted commissioned research for the IMF on the merits of exchange rate pegs in resource-exporters. This argued that pegs require foreign reserves to be accumulated, which can act as a de-facto sovereign wealth fund. The paper was presented at the IMF to an audience of over 100 policymakers and academics, and the research is still ongoing. In 2014 I presented the paper "Optimal monetary responses to oil discoveries" to the Reserve Banks of Australia and New Zealand. This was done to both share the results of the research with policymakers, and receive policymaker feedback on the work. It was very useful on both accounts. In 2015-2016 I engaged with a variety of audiences in the Australian Labor Party (ALP), both senior and grassroots, on the merits of a mining tax in Australia. The ALP introduced a mining tax in in 2012, but it was repealed in 2014 by a new government. This makes Australia one of the few developed countries without a national profits-based mining tax or national commodity sovereign wealth fund. I decided to speak to branches of the Labor party in the coal-rich Hunter Valley to make the case for revisiting the mining tax. I also spoke at a Country Labor Forum with audiences including the Leader of the Opposition, the President of the ALP and the Shadow Agriculture Minister, and met with the Shadow Treasurer. The outcome of these discussions was a change in perspective, with the possibility of revisiting a mining tax within the next 5-10 years, and the potential for future advisory work. I presented my work extensively at seminars and conferences for academic audiences. This included invitations to present at Oxford, the London School of Economics, UC Berkeley, the University of Sydney, the Australian National University, the University of Warwick, UNSW, Monash University, the Hebrew University of Jerusalem, a large number of international conferences on resource economics, and others (for more details please see the CV on my website). I wrote or contributed to a large number of print media articles, policy papers and opinion pieces on macroeconomics and resource policy. These include the Brookings Institution, the IMF Research Bulletin, the Financial Times, The Times (London), the Guardian, VoxEU, Project Syndicate, Ideas for Africa, the Australian Financial Review, the Sydney Morning Herald, the Age, and the Newcastle Herald. For links please see my website. My research has been featured in a number of international media outlets. These include the Financial Times, the Economist, BBC World, NPR Planet Money, Surfing Life, Travel + Leisure, L'Economiste, Tiempo, The Atlantic, the Hindustan Times and the Manila Times, amongst others. For links please see my website. I have also given a number of radio and television interviews on my research on sovereign wealth funds, and on measuring poverty in resource-rich countries. These include ABC radio (Australia), BBC radio (UK), CBC radio (Canada), and Wyoming PBS (US). For links please see my website.
First Year Of Impact 2014
Sector Energy,Environment,Financial Services, and Management Consultancy,Government, Democracy and Justice
Impact Types Economic

 
Description Advisory work for the World Bank and the Government of Libya
Geographic Reach Africa 
Policy Influence Type Participation in advisory committee
 
Description Advisory work for the World Bank and the Government of Uganda
Geographic Reach Africa 
Policy Influence Type Participation in advisory committee
 
Description Gave talk at ALP branches in Hunter Valley, NSW, Australia
Geographic Reach Australia 
Policy Influence Type Participation in a national consultation
 
Description Gave talk at Australian National Country Labor Forum
Geographic Reach Australia 
Policy Influence Type Participation in a national consultation
URL https://twitter.com/fitzhunter/status/647664291139575808
 
Description Met with Australian Shadow Treasurer
Geographic Reach Australia 
Policy Influence Type Participation in a national consultation
 
Description Participated in IMF workshop "Macroeconomic Challenges Facing Low Income Countries"
Geographic Reach Multiple continents/international 
Policy Influence Type Influenced training of practitioners or researchers
URL http://www.imf.org/external/np/seminars/eng/2014/lic/
 
Description Presentation to representative of Saudi Arabian Monetary Authority
Geographic Reach Europe 
Policy Influence Type Gave evidence to a government review
 
Description Presentation to the Reserve Bank of Australia
Geographic Reach Australia 
Policy Influence Type Influenced training of practitioners or researchers
 
Description Presentation to the Reserve Bank of New Zealand
Geographic Reach Australia 
Policy Influence Type Influenced training of practitioners or researchers
 
Description Research on Norwegian Sovereign Wealth Fund
Geographic Reach Europe 
Policy Influence Type Gave evidence to a government review
Impact In the paper "The Elephant in the Ground: Managing Oil and Sovereign Wealth" we recommend that commodity sovereign wealth funds: i) Diversify away from commodities below the ground in their financial portfolios above the ground, to spread their risk; ii) Increase the share of equities (relative to bonds) in their above-ground portfolio as commodities are extracted and their subsoil risk exposure falls; iii) Spend a decreasing share of their financial portfolio as it comprises a larger share of total wealth. The paper had a particular focus on Norway, as the world's largest sovereign wealth fund with ~USD 900 billion in assets under management. We presented our findings to the Norwegian Ministry of Finance twice (2013, 2014), the Norges Bank (2014), and to academic audiences in Norway which included future members of government commissions into the issue (2013, 2014, 2016). The impact is that Norway has decided to divest coal from its portfolio, and is considering doing the same for oil (i). In 2016 a government commission also recommended that Norway's fund increase its equity share from 60-70%, which amounts to an asset allocation worth ~USD 90 billion (ii). These policy changes are all consistent with the recommendations of our research. They also established a government commission to look into changing their fiscal rule (iii), but they have no plans to yet. For more information please see: - http://voxeu.org/article/norway-right-reassess-its-sovereign-wealth-fund - https://www.ft.com/content/ce89a818-a3b8-11e3-aa85-00144feab7de - https://www.ft.com/content/a1527120-9511-11e6-a80e-bcd69f323a8b - https://www.regjeringen.no/en/whatsnew/Ministries/fin/press-releases/2016/report-on-the-equity-portion-of-the-government-pension-fund-global/the-equity-share-of-the-government-pension-fund-global/id2516179/
URL http://www.regjeringen.no/en/dep/fin/press-center/press-releases/2014/Government-commissions-to-cons...
 
Description ECOCEP - Economic Modelling for Climate-Energy Policy
Amount € 3,225 (EUR)
Organisation European Commission 
Department Seventh Framework Programme (FP7)
Sector Public
Country European Union (EU)
Start 08/2014 
End 10/2014
 
Description ECOCEP - Economic Modelling for Climate-Energy Policy
Amount € 2,000 (EUR)
Organisation European Commission 
Department Seventh Framework Programme (FP7)
Sector Public
Country European Union (EU)
Start 04/2015 
End 04/2015
 
Title General equilibrium model of Libya 
Description This is a small general equilibrium model of Libya I built and calibrated for a project advising the World Bank and the Government of Libya. It can be used to study the effect of various scenarios for spending Libya's oil wealth. 
Type Of Material Computer model/algorithm 
Provided To Others? No  
Impact The model underpinned a report to the World Bank and the Government of Libya on how to spend their oil revenues. The model will also be handed over to the Libyan Ministry of Finance. 
 
Title Method for measuring rural poverty using satellites 
Description In Smith and Wills (2016) we develop a method for measuring rural poverty around the world. To do this we use satellite data on night-time light emissions and population, to identify the rural poor as the people living in darkness. This measure is closely correlated with the World Bank's measure of poverty, which relies on surveys conducted in developing countries. Our measure is i) faster to collect, ii) easier and cheaper to collect, iii) geo-spatially identified down to a 1km2 resolution. 
Type Of Material Data analysis technique 
Year Produced 2016 
Provided To Others? Yes  
Impact We have received interest in the method from economists at the IMF. We hope that this method will enter into regular use for the monitoring and study of global poverty. 
URL https://samuelwills.wordpress.com/poverty-and-darkness/
 
Title Model combining financial portfolios with natural resources 
Description In the paper "The Elephant in the Ground: Managing Oil and Sovereign Wealth", my coauthors and I develop an economic model that unifies three previously distinct strands of literature, on portfolio allocation (eg Merton, 1990), resource extraction (eg Hotelling, 1931) and precautionary savings (eg Kimball, 1990). This model is then applied to Norway's sovereign wealth fund in a Matlab program, which will be uploaded onto my website when the paper is accepted for publication. 
Type Of Material Computer model/algorithm 
Provided To Others? No  
Impact This model informed our paper, which was presented to the heads of the Asset Management Department of the Norwegian Ministry of Finance, and has been submitted to the Norwegian commission investigating changes to the fiscal rule. 
URL http://www.oxcarre.ox.ac.uk/files/OxCarreRP2013129(4).pdf
 
Description Associate at Centre for Applied Macroeconomic Analysis (ANU, Australia) 
Organisation Australian National University (ANU)
Department Centre for Applied Macroeconomic Analysis
Country Australia 
Sector Academic/University 
PI Contribution I am a research associate at the Centre for Applied Macroeconomic Analysis (CAMA) at ANU (Australia). I visited the group for 2 months in August and September 2014, attended seminars, discussed research and presented my work three times during the visit.
Collaborator Contribution CAMA was kind enough to host me in their offices for two months, allowed me to attend their seminars, discuss research and present my work.
Impact I visited CAMA for two months for a research visit in August and September 2014. I presented my research three times whilst there. I released two working papers for the CAMA working paper series.
Start Year 2014
 
Description Associate at the Centre for Macroeconomics 
Organisation London School of Economics and Political Science (University of London)
Department Centre for Macroeconomics (CFM)
Country United Kingdom 
Sector Academic/University 
PI Contribution I am an associate at the Centre for Macroeconomics. I have visited the Centre semi-regularly over the past year to attend seminars and discuss research.
Collaborator Contribution The Centre for Macroeconomics has been kind enough to allow me to visit semi-regularly over the past year to attend seminars and discuss research.
Impact I have one working paper submitted to the CfM discussion paper series, and a second will be submitted very soon.
Start Year 2013
 
Description Visiting Scholar at UC Berkeley, Dept of Ag and Resource Econ 
Organisation University of California, Berkeley
Department Department of Agricultural and Resource Economics
Country United States 
Sector Academic/University 
PI Contribution I was a visiting scholar at the Department of Agricultural and Resource Economics at UC Berkeley for the month of April 2015. During this time I presented my research in a seminar, regularly attended seminars and workshops (including the 2015 Bioeconomy Conference). I also met regularly with students and faculty members to discuss current and future research.
Collaborator Contribution The Department of Agricultural and Resource Economics provided me with an office and allowed me to attend seminars and workshops. A number of faculty members also provided me with helpful comments on my research, and we discussed the prospect of beginning some work on the economics of droughts - which is still in the pipeline.
Impact - Presented work at a UC Berkeley seminar - Established useful connections - Discussed potential for future collaboration
Start Year 2015
 
Description Visiting Scholar at the University of Sydney, Department of Economics 
Organisation University of Sydney
Country Australia 
Sector Academic/University 
PI Contribution I visited the Department of Economics at the University of Sydney for a total of three weeks during October and November 2015. During this time I presented my research in a seminar, discussed research with students and faculty, and discussed the potential for future collaboration.
Collaborator Contribution The University of Sydney provided me with an office, allowed me to present my research and I received useful feedback on a number of pieces of my research.
Impact - Presented my research at a seminar. - Received an offer of a tenure-track Assistant Professor position in the Department of Economics at the University of Sydney, starting October 2016, which I have accepted.
Start Year 2015
 
Description ABC News Radio interview, Hunter Valley, NSW Australia 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Media (as a channel to the public)
Results and Impact I was invited to speak on ABC News Radio with Jill Emberson. This broadcasts around the coal mining region of Newcastle and the Hunter Valley in Australia. I spoke about my research, and the merits of a mining tax and sovereign wealth fund. I was invited to return and speak again when I am next in Newcastle.
Year(s) Of Engagement Activity 2015
URL https://twitter.com/jillemberson/status/676893239153135617
 
Description AERC Biannual Plenary (Arusha, Tanzania) 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact I was invited to present the plenary lecture at the AERC Biannual conference in Arusha, Tanzania, on the economics of sovereign wealth funds -focusing specifically on Africa. The paper was coauthored with Tony Venables. The purpose was to inform policymakers, senior politicians (including the African Union Ambassador) and researchers. There was good chance for discussion afterwards, and in the four days of the conference.
Year(s) Of Engagement Activity 2015
URL http://old.aercafricaevents.org/conference/the-conference.html
 
Description Advisory work for the World Bank and the Government of Libya 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact I prepared a report modelling the effects of various oil spending scenarios on Libya's economy. It was designed to inform the conduct of policy in Libya when oil production rose after the end of conflict.

There have been some delays in implementing the report giving ongoing conflict in Libya. This project also helped give rise to another project on the Uganda oil and gas discoveries for the World Bank.
Year(s) Of Engagement Activity 2014
 
Description Advisory work for the World Bank and the Government of Uganda 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact My work on the conduct of monetary policy in East Africa and the move towards monetary union closely shaped the recommendations in the World Bank's report to the Ugandan Government.

Report is still forthcoming.
Year(s) Of Engagement Activity 2014
 
Description Commissioned research and presentation to International Monetary Fund 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact The commissioned work and series of two conferences allowed me to meet and discuss my work with other researchers, and disseminate it to a wide audience of policymakers in Washington DC. There was a great deal of discussion afterwards, as the ideas I presented were quite new, and there is the possibility of further collaboration with the IMF in the future.

I was asked if I would like to spend some time at the IMF's research department to collaborate with other researchers interested in similar topics there. I said that I would, though no date has been set yet.
Year(s) Of Engagement Activity 2014
URL http://www.imf.org/external/np/seminars/eng/2014/lic/
 
Description EAERE Conference Helsinki 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Postgraduate students
Results and Impact Presented paper titled "Seven Principles for Managing Resource Wealth" at the EAERE annual conference. There were questions and discussions afterwards, and the presentation led to an invitation to present at the University of Sydney, and subsequently a tenure track job offer there.
Year(s) Of Engagement Activity 2015
URL http://www.eaere2015.org/
 
Description Labor Party presentation in Hunter Valley, NSW, Australia 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact I gave a talk on the merits of a mining tax and sovereign wealth fund to seven Australian Labor Party branches in the coal mining region of the Hunter Valley in NSW, Australia. The ALP previously established a mining tax but it was later abolished by a new conservative government. Internally the party faced a lot of scepticism about the policy, and its potential to harm the mining industry, particularly in the branches I spoke at. I used the findings from my research, and discussion of other policy engagement around the world, to explain why a mining tax is well suited to Australia (and why it has been widely adopted abroad). I noticed a huge shift in the audience's attitudes after the talk and an desire to see a mining tax reinstated. I hope that this engagement might help place a mining tax back on the political agenda in Australia in the next 5 years or so.
Year(s) Of Engagement Activity 2015
 
Description Meeting with Australian Shadow Treasurer 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact After speaking at the Australian National Country Labor Forum, and at ALP branch meetings in the Hunter Valley, I arranged to meet with the Shadow Treasurer (and former Treasurer) of Australia, The Hon Chris Bowen MP. In a 1 hour meeting we discussed my research and the merits of a mining tax and sovereign wealth fund. The ideas were well received, but it sounds like the idea is not politically feasible in Australia at the next election in 2016 (particularly with the fall in commodity prices). He was open to placing it on the agenda after that.
Year(s) Of Engagement Activity 2015
 
Description Newspaper articles publicising my research 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact I publicised the findings of two research papers through a wide number of media outlets including newspapers, websites and radio.

The paper "Left in the Dark: Oil and Rural Poverty" was covered by the following:
Today Program, BBC Radio 4 (30/07/2016); The Atlantic (02/08/2016); Canadian Broadcasting Corporation - interviewed on 24 radio stations (16/08/2016); Phys.org (02/08/2016); Hindustan Times (29/07/2016); Manila Times (01/08/2016); University of Oxford (01/08/2016); University of Sydney (03/08/2016); VoxEU (28/08/2016).

The paper "Natural Assets: Surfing a Wave of Economic Growth" was covered by the following:
The Financial Times (07/01/2017); The Economist (08/08/2016); BBC World (Spanish) (15/08/2016); Chris Blattman's Blog (29/07/2016); NPR Planet Money (Twitter) (10/08/2016); The Change Agenda (Youtube) (31/03/2016); Surfline (13/08/2016); The Wave (12/08/2016); Surfing Life (11/08/2016); Ocean Living Lab (French) (11/08/2016); Tiempo (Spanish) (15/08/2016); BankingNews (Greek) (08/08/2016); Travel + Leisure (18/08/2016); L'Economiste (French) (26/08/2016)

Please find links to all the original articles on my website: https://samuelwills.wordpress.com/research/
Year(s) Of Engagement Activity 2016
URL https://samuelwills.wordpress.com/research/
 
Description Participated in Panel Discussion at the Natural Resource Charter Conference, 2014 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Panel sparked questions and debate afterwards.

Co-panellist from the World Bank expressed interest in the work and the potential for future advisory work or collaboration.
Year(s) Of Engagement Activity 2014
URL http://www.resourcegovernance.org/news/2014-natural-resource-charter-conference-session-information-...
 
Description Presentation at CSAE Conference, Oxford 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact Discussions and questions, and useful feedback.

I was approached about the possibility of using the paper "Eight Principles for Managing Resource Wealth" for teaching purposes. I am in the process of revising it to this end.
Year(s) Of Engagement Activity 2014
URL http://www.csae.ox.ac.uk/conferences/2014-edia/
 
Description Presentation at the Reserve Bank of New Zealand 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Discussions and questions afterwards, raising the profile of my research, useful feedback on next revision of the paper.

Potential for future visits
Year(s) Of Engagement Activity 2014
 
Description Presentation to Rotary Club in Hunter Valley, NSW, Australia 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Public/other audiences
Results and Impact I spoke at a Rotary Club in Nelson Bay, NSW, Australia, on the merits of a mining tax and sovereign wealth fund. The aim was in educate the general public on the importance of this policy, in a mining-rich region that was very opposed to Australia's mining tax when it was introduced. The audience reported a big change in their attitude to the policy.
Year(s) Of Engagement Activity 2016
 
Description Presentation to representative of Saudi Arabian Monetary Authority 
Form Of Engagement Activity Participation in an open day or visit at my research institution
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Presented work on the benefits of establishing a sovereign wealth fund, and how they should be structured to Dr Khalid Al-Sweilem, the former Director of the Investment Management Department at the Saudi Arabian Monetary Authority, who is currently leading an investigation into establishing such a fund in Saudi Arabia.

I was told that the presentation and underlying research was extremely useful, and provides good support for the establishment of a sovereign wealth fund which they are currently considering in Saudi Arabia.
Year(s) Of Engagement Activity 2014
URL http://belfercenter.ksg.harvard.edu/files/Saudi.pdf
 
Description Presentation to the Heads of the Asset Management Department in the Norwegian Ministry of Finance 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact I presented preliminary findings from my paper "The Elephant in the Ground: Managing Oil and Sovereign Wealth". This paper argues that sovereign wealth funds - including Norways - are not investing in the correct assets, or spending the proceeds appropriately. I presented this work to the key policy-makers in Norway responsible for these decisions. They were very receptive to our ideas and had previously read the paper. I learned that they had also reported to the Parliament on findings from our paper before the meeting. This subsequently informed the newly revised version of the paper.

The Norwegian Ministry of Finance reported to the Parliament on findings from our paper in a 2014 White Paper. Since meeting with them a government commission has been established in October 2014 to investigate the spending rule from Norway's fund, to which we have submitted this paper.
Year(s) Of Engagement Activity 2014
URL http://www.regjeringen.no/en/dep/fin/Documents-and-publications/propositions-and-reports/Reports-to-...
 
Description Presentation to the Reserve Bank of Australia 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact I presented the paper "Optimal monetary responses to oil discoveries" to an audience of the intended practitioners: monetary policy-makers in a resource-rich country. It prompted a good discussion of the challenges associated with oil discoveries and my analysis was well-received.

Potential for future visits to the Reserve Bank of Australia.
Year(s) Of Engagement Activity 2014
 
Description Presented at the World Congress for Environmental and Resource Economics, Istanbul. 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Type Of Presentation paper presentation
Geographic Reach International
Primary Audience Postgraduate students
Results and Impact Good discussion and questions afterwards, extensive discussion throughout the week of the conference, useful feedback informing new revisions of the paper.

At least one potential collaborations and two university visits were discussed.
Year(s) Of Engagement Activity 2014
URL http://www.wcere2014.org/en/
 
Description Spoke at the Australian National Country Labor Forum 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact I spoke at the Australian National Country Labor Forum, organised by the Australian Labor Party (ALP). The ALP previously introduced a mining tax and used the revenues for tax cuts, but the new government abolished the tax. I spoke on the merits of taxing mining and using the revenues to establish a sovereign wealth fund. Audience included senior Labor party members, including the Leader of the Opposition, the National President of the ALP, and the Shadow Minister for Agriculture.
Year(s) Of Engagement Activity 2015
URL https://twitter.com/fitzhunter/status/647664291139575808
 
Description Stroock Sovereign Wealth Fund Forum, Jackson Hole, Wyoming, USA 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact I accepted invitation to present my research on sovereign wealth funds and portfolio allocation to a high-profile audience which included US State Governors and Treasurers from Alabama, Alaska, North Dakota and Wyoming; Sovereign Wealth Fund CEOs from Alaska, Alberta, New Mexico and New Zealand, the President of the Federal Reserve Bank of Kansas, and senior representatives from businesses, NGOs and international organisations including the former Vice President of the World Bank.

In addition, I also presented at an open public forum and was interviewed by media, both of which were broadcast on Wyoming PBS television. See links here:
1. https://www.youtube.com/watch?v=FhCDlca96A0&feature=youtu.be
2. http://www.wyomingpbs.org/treasurer.php
Year(s) Of Engagement Activity 2016
URL https://www.uwyo.edu/econfin/_files/images/events/stroock-forum-2016.pdf
 
Description Wrote article for IMF Research Bulletin 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Wrote article on the economics of natural resources and sovereign wealth funds in developing countries. Article was published in the IMF Research Bulletin, reaching a wide range of researchers, policymakers and advisers. The aim of the article was to disseminate information about my research to a broader policy audience.
Year(s) Of Engagement Activity 2015
URL http://www.imf.org/External/Pubs/FT/irb/2015/03/index.pdf
 
Description Wrote article for the Brookings Institution 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Wrote article on the economics of natural resources and sovereign wealth funds in developing countries. The article was published online by the Brookings Institution, reaching a wide range of academics, NGOs and policymakers. The aim was to disseminate the findings from my research with a broader policy audience.
Year(s) Of Engagement Activity 2015
URL http://www.brookings.edu/blogs/africa-in-focus/posts/2015/09/18-resource-funds-stabilization-parking...
 
Description Wrote eleven (11) opinion pieces and newspaper articles in various international publications 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact Published articles in Project Syndicate, Ideas for Africa, the Sydney Morning Herald, the Age, the Newcastle Herald, the Financial Times, the Times (London), the Australian Financial Review, the Guardian, VoxEU. These were all on economic policy, focusing on the economics of natural resources, rural unemployment and climate change.

Feedback in various forms from colleagues and the broader public who read the articles. One article on Project Syndicate prompted a piece of advisory work for the World Bank on monetary policy in Uganda.
Year(s) Of Engagement Activity 2014,2015
URL http://samuelwills.wordpress.com/opinion/