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Exchange Rate Assessments

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Author Info

  • Irineu E. Carvalho Filho
  • Rudolfs Bems

Abstract

Are the current account fluctuations in oil-exporting countries "excessive"? How should their real exchange rate respond to the evolution of external (and domestic) fundamentals? This paper proposes methodologies tailored to the specific features of oil-exporting countries that help address these questions. Price-based methodologies (based on the time series of real effective exchange rates) identify a strong link between the real exchange rate and the terms of trade, but have relatively limited explanatory power. On the other hand, an empirical model of the current account, which fits oil exporting countries'' data well, and an intertemporal model that takes into account the stock of oil reserves provide useful benchmarks for oil exporters'' external balances.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/281.

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Length: 35
Date of creation: 01 Dec 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/281

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Related research

Keywords: Oil exporting countries; Commodity price fluctuations; Economic models; Exchange rates; Oil prices; Oil revenues; Real effective exchange rates; exporting countries; oil exporters; oil-exporting countries; exporters; oil countries; oil exports; oil exporting; terms of trade; current account balance; reer; output growth; oil importers; importing countries; oil-importing countries; trading partners; tradable goods; export taxes; exporting country; export supply; trade restrictions; domestic prices; trade liberalization; price fluctuations; current account surplus; gas exports; trading partner; trade shocks; gas exporting country; measure of trade; balance trade; elasticity of exports; exchange rate movements; commodity prices; current account deficit; oil-producing countries; domestic consumption; oil-exporting country; terms of trade shocks; oil export; restriction index; trade restriction; real effective exchange rate; exports of oil; domestic demand; transition economies;

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References

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  1. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
  2. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
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  4. Peter Pedroni, 2001. "Purchasing Power Parity Tests in Cointegrated Panels," Department of Economics Working Papers 2001-01, Department of Economics, Williams College.
  5. Jungjin Lee & Abdul Abiad & Prakash Kannan, 2009. "Evaluating Historical CGER Assessments," IMF Working Papers 09/32, International Monetary Fund.
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  10. Megumi Kubota, . "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.
  11. Rudolfs Bems & Irineu E. Carvalho Filho, 2009. "Current Account and Precautionary Savings for Exporters of Exhaustible Resources," IMF Working Papers 09/33, International Monetary Fund.
  12. Marianne Baxter & Michael A. Kouparitsas, 2000. "What Can Account for Fluctuations in the Terms of Trade?," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-112, Boston University - Department of Economics.
  13. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
  14. Ca' Zorzi, Michele & Chudik, Alexander & Dieppe, Alistair, 2009. "Current account benchmarks for central and eastern Europe: a desperate search?," Working Paper Series 0995, European Central Bank.
  15. Ghosh, Atish R. & Ostry, Jonathan D., 1997. "Macroeconomic uncertainty, precautionary saving, and the current account," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 121-139, September.
  16. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
  17. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments," IMF Occasional Papers 261, International Monetary Fund.
  18. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  19. Hamid Faruqee & Jaewoo Lee, 2009. "Global Dispersion of Current Accounts: Is the Universe Expanding?," IMF Staff Papers, Palgrave Macmillan, vol. 56(3), pages 574-595, August.
  20. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  21. Hanan Morsy, 2010. "Current Account Determinants For Oil-Exporting Countries," Working Papers 511, Economic Research Forum, revised Mar 2010.
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Citations

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Cited by:
  1. Juliana Dutra Araujo & Grace Bin Li & Marcos Poplawski-Ribeiro & Luis-Felipe Zanna, 2013. "Current Account Norms in Natural Resource Rich and Capital Scarce Economies," IMF Working Papers 13/80, International Monetary Fund.
  2. Robert C. York & Misa Takebe, 2011. "External Sustainability of Oil-Producing Sub-Saharan African Countries," IMF Working Papers 11/207, International Monetary Fund.
  3. Paul Cashin & Samya Beidas-Strom, 2011. "Are Middle Eastern Current Account Imbalances Excessive?," IMF Working Papers 11/195, International Monetary Fund.
  4. Jordi Prat & Leandro Medina & Alun H. Thomas, 2010. "Current Account Balance Estimates for Emerging Market Economies," IMF Working Papers 10/43, International Monetary Fund.

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