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Current Accounts and Oil Price Fluctuations in Oil-Exporting Countries: the Role of Financial Development

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  • Jean-Pierre Allegret
  • Cécile Couharde
  • Dramane Coulibaly
  • Valérie Mignon

Abstract

Oil-exporting countries usually experience large current account improvements following a sharp increase in oil prices. In this paper, we investigate this oil price-current account relationship on a sample of 27 oil-exporting economies. Relying upon the estimation of panel smooth transition regression models over the 1980-2010 period, we provide evidence that refines the traditional interpretation of oil price effects on current accounts. While current accounts are positively affected by oil price variations, this effect is nonlinear and depends critically on the degree of financial development of oil-exporting economies. More specifically, oil price variations exert a positive impact on the current account position for less financial developed countries, while this influence tends to diminish when the degree of financial deepness augments.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2013-19.

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Date of creation: Jun 2013
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Handle: RePEc:cii:cepidt:2013-19

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Keywords: Current account; oil price; financial development; panel smooth transition; regression models;

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Cited by:
  1. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," EconomiX Working Papers 2014-22, University of Paris West - Nanterre la Défense, EconomiX.

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