External Adjustment in Oil Exporters: The Role of Fiscal Policy and the Exchange Rate

June 8, 2016

Preview Citation

Format: Chicago

Alberto Behar, and Armand P Fouejieu. External Adjustment in Oil Exporters: The Role of Fiscal Policy and the Exchange Rate, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

After the decline in oil prices, many oil exporters face the need to improve their external balances. Special characteristics of oil exporters make the exchange rate an ineffective instrument for this purpose and give fiscal policy a sizeable role. These conclusions are supported by regression analysis of the determinants of the current account balance and of the trade balance. The results show little or no relationship with the exchange rate and, especially for the less diversified oil exporters (including the Gulf Cooperation Council), a strong relationship with the fiscal balance or government spending.

Subject: Balance of payments, Commodities, Current account, Current account balance, Expenditure, International trade, Oil, Trade balance

Keywords: Current account, Current account balance, Current account elasticity, Current account response, Exchange rates, Expenditure switching, Fiscal policy, Foreign currency, Global, Government spending, Government trade balance multiplier, Marshall Lerner conditions, Oil, Oil exporter, Oil exporters, Price effect, Reversal episode, Trade balance, Trade balance elasticity, Trade balance equation, Trade balance regression, Trade balance response, Trade volume elasticities, Wage effect, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/107
Stock No:

WPIEA2016107
ISBN:

9781484379929
ISSN:

1018-5941

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