02650cas a2200265 a 4500 AALejournalIMF014317 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475515459 1018-5941 BD-DhAAL BD-DhAAL Melina, Giovanni. Debt Sustainability, Public Investment, and Natural Resources in Developing Countries : the DIGNAR Model / Giovanni Melina, Susan Yang, Luis-Felipe Zanna. Washington, D.C. : International Monetary Fund, 2014. 1 online resource (41 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 This paper presents the DIGNAR (Debt, Investment, Growth, and Natural Resources) model, which can be used to analyze the debt sustainability and macroeconomic effects of public investment plans in resource-abundant developing countries. DIGNAR is a dynamic, stochastic model of a small open economy. It has two types of households, including poor households with no access to financial markets, and features traded and nontraded sectors as well as a natural resource sector. Public capital enters production technologies, while public investment is subject to inefficiencies and absorptive capacity constraints. The government has access to different types of debt (concessional, domestic and external commercial) and a resource fund, which can be used to finance public investment plans. The resource fund can also serve as a buffer to absorb fiscal balances for given projections of resource revenues and public investment plans. When the fund is drawn down to its minimal value, a combination of external and domestic borrowing can be used to cover the fiscal gap in the short to medium run. Fiscal adjustments through tax rates and government non-capital expenditures-which may be constrained by ceilings and floors, respectively-are then triggered to maintain debt sustainability. The paper illustrates how the model can be particularly useful to assess debt sustainability in countries that borrow against future resource revenues to scale up public investment. Mode of access: Internet Yang, Susan. Zanna, Luis-Felipe. IMF Working Papers; Working Paper ; No. 2014/050 Full text available on IMF http://elibrary.imf.org/view/journals/001/2014/050/001.2014.issue-050-en.xml IMF e-Library