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date: 28 November 2020

Abstract and Keywords

Historically, a key purpose of sovereign wealth funds (SWFs) has been to help manage and minimize a range of negative economic and political consequences of natural resource wealth, often lumped together as the “resource curse.” This chapter asks to what extent SWFs—specifically “resource funds”—can mitigate the resource curse. It discusses the available empirical evidence for the effectiveness of resource funds as well as the relationship between societal governance and the effectiveness of resource funds. The available findings suggest that wider societal governance is of significantly greater importance for tackling the resource curse than the existence of a resource fund. Bad governance in a country prevents even the most transparent and robust resource funds from becoming an effective policy instrument. Conversely, resource funds can be successful in countries with effective societal institutions such as sound fiscal rules, good quality of government budget documentation, free civil society and independent media.

Keywords: sovereign wealth fund, resource fund, stabilization fund, savings fund, Dutch Disease, resource-rich, governance

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