OPTIMAL SIMPLE FISCAL RULES 13 For country-specific parameters, we chose to calibrate to Algeria and Trinidad & Tobago (TTO). This is mostly because Algeria is close to a “typical” oil producer, and TTO is close to a “typi— — cal” gas exporter many countries export both as measured by the size of resource exports relative to non-resource GDP. Specifically, BJS2013 (Table 1) lists the 2002-07 average export revenues/non-resource GDP for 21 petroleum exporting countries which have petroleum export — revenues/non-resource GDP above 10% running from Sudan (12%) to Saudi Arabia (82%). The cross-country average is 38%, which is fairly close to Algeria’s 33% oil revenues and so it might be regarded as “typical”. BJS2013 also list five countries with natural gas exports above 10% of non-resource GDP, and TTO’s 20% is very close to the 21% average. For the calibration of the model, we also include TTO’s oil exports (13% non-resource GDP) which bring total TTO resource exports to 33% non-resource GDP. As such we calibrate _Q_ = 1 _/_ 3 (and _Yss_ = 1, _Pss_ = 1) so total natural resource exports are 1/3 of non-resource GDP ( _QP/Y_ = 1 _/_ 3) to reflect the relative size of resource exports to non-resource GDP in Algeria and TTO.<sup>16</sup> However, we also chose these two countries based on a desire for geographic diversity (Middle East/North Africa for Algeria, Latin America/Caribbean for TTO), and diversity of country size (TTO has about 1.3m people with Algeria having 40 million). Finally, we also excluded a number of other countries with idiosyncratic features that would make optimal simple rules difficult to calculate, such as large numbers of migrant workers or political instability.<sup>17</sup> Table 1. Exogenous-Income Model Calibration to Algeria and Trinidad & Tobago

|**Param.**|**Value**|**Description**|**Algeria**|**TTO**|**Target/Source**|
|---|---|---|---|---|---|
|_β_|0.96|Discount Factor|-|-|s.s. 4% annual real interest rate|
|_σ_|2|Coefcient of risk aversion|-|-|Common value in literature|
|_ω_|0.5|HtM HH share|-|-|Galí _et al_ (2007)|
|_Yss_|1|SS non-resource GDP.|-|-|Normalization|
|_PssQ_|0.33|SS resource GDP|0.33|0.33|resource GDP / non-resource GDP (BJS2013)|
|_Ass_|0.3|S.s. SWF|0.33|0.28|SWF / non-resource GDP (SWF institute)|
|_Bss_|0|S.s. private assets|-|-|Symmetric s.s. consumption|
|_ψ_|0.01|Debt-elasticity of interest spread|-|-|Schmitt-Grohe & Uribe (2003,2016) (see text)|
|_τ_|0.15|Income tax rate|0.16|0.15|Tax revenue / non-resource GDP (IMF)|
|_ρy_|0|Persistence of non-resource income shocks|Insig|0.3*|Estimate of _ρ_ based on HP Filtered data.**|
|_ρp_|0.93|Persistence of commodity export prices|0.94|0.91|TTO: weighted ave of _ρoil_ = 0_._94 and _ρgas_ = 0_._89<br>Algeria: _ρoil_ = 0_._94. (from BJS2013)|
|_σy_|4%|Std. deviation of non-resource income|4%|2%|SD of error from AR(1) reg on fltered data**|
|_σp_|24%|Std. deviation of resource prices|23%|26%|Average of SD export prices (BJS2013)|

Notes: * In part due to oil prices, see Section 6 on “correlated shocks” **Regression of _lnXt_ = _α_ + _ρlnXt−_ 1 + _et_ Despite their other differences, in most cases Algeria and TTO have very similar characteristics relevant for the model (in the cases where parameters differ, we usually take the average). We calibrate the tax rate _τ_ = 0 _._ 15 as non-resource taxes are 15% of GDP in Trinidad and Tobago (IMF 2014 Article IV) and 16% of GDP for Algeria (IMF 2016 Article IV). Algeria and Trinidad & Tobago also have very similar sized SWFs. The Algerian SWF represents a share of 33% of the

> 16Note that Algeria also exports natural gas, though these are not included in the calibration. In general, the results of the paper are fairly insensitive to the exact size of resource exports around a reasonable baseline.

> 17For example, Gulf Co-operation Countries (GCC) have a high share of migrant workers. This could mean that in times of low oil prices, governments reduce migration — a channel of adjustment not available to other countries — which might affect the optimal fiscal rule.