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The current account and precautionary savings for exporters of exhaustible resources

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  • Bems, Rudolfs
  • de Carvalho Filho, Irineu

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 for exporters of exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. The parameterized model fares moderately well at capturing current account balances in both cross-section and time-series data. The results show that the precautionary motive can generate sizable external sector savings, the more so the greater the weight of exhaustible resource revenues in future income.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:48-64
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    References listed on IDEAS

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    3. Blaise Gnimassoun & Marc Joets & Tovonony Razafindrabe, 2016. "On the link between current account and oil price fluctuation in diversified economies: The case of Canada," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2016-08, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
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    5. van der Ploeg, Frederick & Venables, Anthony J., 2013. "Absorbing a windfall of foreign exchange: Dutch disease dynamics," Journal of Development Economics, Elsevier, vol. 103(C), pages 229-243.
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    7. van den Bremer, Ton & van der Ploeg, Frederick & Wills, Samuel, 2016. "The Elephant In The Ground: Managing Oil And Sovereign Wealth," European Economic Review, Elsevier, pages 113-131.
    8. Carlos A. Carrasco & Felipe Serrano, 2014. "Global and European Imbalances:A critical review," Working papers wpaper42, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    9. repec:eee:ecanpo:v:55:y:2017:i:c:p:179-193 is not listed on IDEAS
    10. Thomas McGregor, 2017. "Pricing sovereign debt in resource rich economies," OxCarre Working Papers 194, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
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    12. Li, Bin Grace & Gupta, Pranav & Yu, Jiangyan, 2017. "From natural resource boom to sustainable economic growth: Lessons from Mongolia," International Economics, Elsevier, pages 7-25.
    13. van den Bremer, Ton S. & van der Ploeg, Frederick, 2016. "Saving Alberta's resource revenues: Role of intergenerational and liquidity funds," Energy Policy, Elsevier, vol. 99(C), pages 132-146.
    14. Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yeşin, 2017. "Merchanting and Current Account Balances," The World Economy, Wiley Blackwell, vol. 40(1), pages 140-167, January.
    15. Araujo, Juliana D. & Li, Bin Grace & Poplawski-Ribeiro, Marcos & Zanna, Luis-Felipe, 2016. "Current account norms in natural resource rich and capital scarce economies," Journal of Development Economics, Elsevier, pages 144-156.
    16. Melina, Giovanni & Yang, Shu-Chun S. & Zanna, Luis-Felipe, 2016. "Debt sustainability, public investment, and natural resources in developing countries: The DIGNAR model," Economic Modelling, Elsevier, pages 630-649.
    17. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    18. Mohn, Klaus, 2016. "Resource revenue management and wealth neutrality in Norway," Energy Policy, Elsevier, vol. 96(C), pages 446-457.
    19. Iacono, Roberto, 2017. "A comparison of fiscal rules for resource-rich economies," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 179-193.
    20. Magali Dauvin, 2014. "Energy prices and the real exchange rate of commodity-exporting countries," International Economics, CEPII research center, issue 137, pages 52-72.
    21. Samuel Wills, 2015. "Seven Principles for Managing Resource Wealth," Economics Series Working Papers OxCarre Research Paper 15, University of Oxford, Department of Economics.
    22. Mahadeva Lavan, 2014. "Why does natural resource abundance not always lead to better outcomes? Limited financial development versus political impatience," The B.E. Journal of Macroeconomics, De Gruyter, vol. 14(1), pages 1-37, January.
    23. Emir Zildžović, 2015. "The Sustainability Of Serbia`S External Position: The Impact Of Fiscal Adjustment And External Shocks," Economic Annals, Faculty of Economics, University of Belgrade, vol. 60(204), pages 31-60, January –.
    24. Samuel Wills, 2015. "Seven Principles for Managing Resource Wealth," OxCarre Working Papers 154, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    25. Tidiane Kinda & Montfort Mlachila & Rasmané Ouedraogo, 2016. "Commodity Price Shocks and Financial Sector Fragility," IMF Working Papers 16/12, International Monetary Fund.

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