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External Capital Structures and Oil Price Volatility

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  • John D. Burger
  • Alessandro Rebucci

    ()

  • Francis E. Warnock
  • Veronica Cacdac Warnock

Abstract

This paper assesses the extent to which a country’s external capital structure can aid in mitigating the macroeconomic impact of oil price shocks. Two Caribbean economies highly vulnerable to oil price shocks are considered: an oil importer (Jamaica) and an oil exporter (Trinidad and Tobago). From a risk-sharing perspective, a desirable external capital structure is one that, through international capital gains and losses, helps offset responses of the current account balance to external shocks. It is found that both countries could alter their international portfolio to provide a better buffer against such shocks.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4667.

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Date of creation: May 2010
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Handle: RePEc:idb:wpaper:4667

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Keywords: Hedging; Oil; Foreign assets and liabilities; International portfolios;

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  1. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," IMF Working Papers 06/69, International Monetary Fund.
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  4. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2008. "Cross-Border Returns Differentials," NBER Working Papers 13768, National Bureau of Economic Research, Inc.
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  15. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
  16. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2008. "Cross-border returns differentials," International Finance Discussion Papers 921, Board of Governors of the Federal Reserve System (U.S.).
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