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Current Account and Precautionary Savings for Exporters of Exhaustible Resources

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  • Rudolfs Bems
  • Irineu E. Carvalho Filho

Abstract

Exporters of exhaustible resources have historically exhibited higher income volatility than other economies, suggesting a heightened role for precautionary savings. This paper uses a parameterized small open economy model to quantify the role of precautionary savings in economies with exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. Results show that the precautionary motive can generate sizable external sector savings. When aggregated over the sample countries, precautionary savings in 2006 add up to 3.2 percent of GDP. The quantitative importance of the precautionary motive varies considerably across the sample countries and is driven primarily by the weight of exhaustible resource revenues in future income. The parameterized model fares well at capturing current account balances in both cross-section and time-series data.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/33.

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Length: 38
Date of creation: 01 Feb 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/33

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Keywords: Export sector; Developed countries; Developing countries; Income; External sector; Economic models; current account; current account balance; current account balances; current account surpluses; current accounts; current account deficits; current account surplus; current account imbalances; global current account; current account position;

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