01849cas a2200253 a 4500 AALejournalIMF004419 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451864533 1018-5941 BD-DhAAL BD-DhAAL Olters, Jan-Peter. Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy : Lessons from Gabon / Jan-Peter Olters, Daniel Leigh. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (30 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students While models based on Friedman's (1957) permanent-income hypothesis can provide oilproducing countries with long-run fiscal targets, they usually abstract from short-run costs associated with consolidation. This paper proposes a model that takes such adjustment costs (or "habits") into account. Further operational realism is added by permitting differential interest rates on sovereign debt and financial assets. The approach is applied to Gabon, where oil reserves are expected to be exhausted in 30 years. The results suggest that Gabon's current fiscal-policy stance cannot be maintained, while the presence of habits justifies smoothing the bulk of the adjustment toward the sustainable level over three to five years. Mode of access: Internet Leigh, Daniel. IMF Working Papers; Working Paper ; No. 2006/193 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/193/001.2006.issue-193-en.xml IMF e-Library