Background:

This paper studies the effect of the variability in fiscal revenues (induced by volatility in natural resource prices) on public saving in the case of natural resource dependent economies.

Methodology:

A theoretical model is used to extend the work of Van der Ploeg and Venables (2011). Later, an econometric analysis is performed with data from panels of two different data samples. We find evidence in favor of the hypothesis.

Results:

It is found that the greater the variance in fiscal revenues the greater should be the level of net fiscal assets, due to precautionary saving.

Conclusions:

The volatility of fiscal revenues in countries exposed to commodities leads governments to precautionary savings and to have higher levels of fiscal savings.