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Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries

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Author Info

  • Alun H. Thomas
  • Jun Il Kim
  • Aqib Aslam

Abstract

This paper introduces a methodology for assessing external balance in countries with large stocks of non-renewable resources based on oil stock data, and applies it to selected oil producing countries. The methodology uses a stock approach (instead of the more traditional flow approach) to estimate the equilibrium non-oil current account consistent with optimal consumption smoothing. One of the benefits of the stock approach is that geological data for oil reserves can be used to estimate oil wealth; however, the methodology makes the estimated non-oil current account norm very sensitive to oil price projections. Based on an oil price about US$70 per barrel prevailing in the summer of 2007, the baseline estimates indicate that the non-oil current accounts for most of the countries in the sample are broadly in equilibrium. By the same token, using oil price projections as of the summer of 2008 implies large disparities between the equilibrium non-oil current account position and the medium term forecast for all countries in the sample except for Malaysia.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/198.

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Length: 24
Date of creation: 01 Aug 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/198

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Related research

Keywords: Nonoil sector; Oil producing countries; Current account balances; Oil prices; Economic models; current account; current account balance; current accounts; current account deficit; current account deficits; current account position; current account surpluses; current account surplus;

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References

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  1. Jonathan David Ostry & Atish R. Ghosh, 1992. "Macroeconomic Uncertainty, Precautionary Savings and the Current Account," IMF Working Papers 92/72, International Monetary Fund.
  2. Alonso Segura, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis," IMF Working Papers 06/183, International Monetary Fund.
  3. Ghosh, Atish R, 1995. "International Capital Mobility amongst the Major Industrialised Countries: Too Little or Too Much?," Economic Journal, Royal Economic Society, vol. 105(428), pages 107-28, January.
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Citations

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Cited by:
  1. Alun H. Thomas & Tamim Bayoumi, 2009. "Today Versus tomorrow," IMF Working Papers 09/248, International Monetary Fund.
  2. Cherif, Reda & Hasanov, Fuad, 2013. "Oil Exporters’ Dilemma: How Much to Save and How Much to Invest," World Development, Elsevier, vol. 52(C), pages 120-131.
  3. Irineu E. Carvalho Filho & Rudolfs Bems, 2009. "Exchange Rate Assessments," IMF Working Papers 09/281, International Monetary Fund.
  4. Robert C. York & Misa Takebe, 2011. "External Sustainability of Oil-Producing Sub-Saharan African Countries," IMF Working Papers 11/207, International Monetary Fund.
  5. Reda Cherif & Fuad Hasanov, 2012. "Oil Exporters' Dilemma," IMF Working Papers 12/4, International Monetary Fund.
  6. Bems, Rudolfs & de Carvalho Filho, Irineu, 2011. "The current account and precautionary savings for exporters of exhaustible resources," Journal of International Economics, Elsevier, vol. 84(1), pages 48-64, May.

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