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Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom

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Author Info

  • Johannes Wiegand

Abstract

High oil prices have once again led to large external surpluses of oil exporting countries, similar to the 1970s and 1980s. This paper analyzes the extent to which (i) oil exporters use bank deposits to invest these surpluses, and (ii) banks are lending on these funds to emerging market economies. Bank recycling of petro dollars to emerging market economies is found to be almost as important as in the 1970s and 1980s, even though during the current boom, petro dollar bank flows tend to originate in countries like Russia, Libya, or Nigeria rather than in the Middle East. As one consequence, a fall in oil prices could yet again disrupt financing flows to emerging economies. Especially at risk could be countries that rely heavily on bank loans to finance external deficits, many of them in Emerging Europe.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/180.

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Length: 26
Date of creation: 01 Jul 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/180

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Related research

Keywords: Capital flows; Emerging markets; Recycling process; Oil producing countries; Oil exports; Bank credit; oil exporters; exporters; oil exporting; oil exporting countries; oil exporter; average oil price; oil prices; exporting countries; exporter; oil supply; economic perspectives; oil shocks; oil producing; oil revenues;

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Cited by:
  1. Hacihasanoglu, Erk & Turhan, Ibrahim M. & Soytas, Ugur, 2012. "Oil prices and emerging market exchange rates," MPRA Paper 36477, University Library of Munich, Germany.

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