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How do resource-driven economies cope with the oil price slump? A comparative survey of ten major oil-exporting countries




The oil price slump of about 50% since 2014 has had a detrimental effect on oil-exporting emerging market economies (EMEs), potentially threatening to trigger social unrest in countries that had benefited from the oil price boom for more than a decade. We provide a first descriptive account of the policy reactions of central banks and governments of eight important oil-exporting EMEs and compare them with those of two oil-exporting advanced economies, allowing us to distinguish three patterns: One group of countries has so far successfully defended its exchange rate peg to the U.S. dollar, the reference invoicing currency (Saudi Arabia and the United Arab Emirates). A second group gave up resistance to mounting market pressures and carried out step devaluations or switched to a floating exchange rate (Russia, Kazakhstan, Azerbaijan, Nigeria and Angola). A third group of countries continued to let their currencies float (Mexico, Canada and Norway), with the stable long-term relationship between the exchange rate and commodity export prices qualifying these currencies as “commodity currencies.” We conclude that EMEs featuring peg-like regimes and saddled with limited structural diversification, modest fiscal and external buffers as well as weak institutional conditions for capital controls are unlikely to be able to uphold their exchange rate choices if they suffer a major and sustained adverse terms-of-trade shock, and should opt for flexibility sooner rather than later. While declining oil prices may imply a degree of passive diversification, a proactive long-term strategy to develop a more diversified economic structure in good times could at least partly reduce the need for buffers.

Suggested Citation

  • Stephan Barisitz & Andreas Breitenfellner, 2017. "How do resource-driven economies cope with the oil price slump? A comparative survey of ten major oil-exporting countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 33-53.
  • Handle: RePEc:onb:oenbfi:y:2017:i:1:b:2

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    References listed on IDEAS

    1. Stephan Barisitz, 2015. "The Russian banking sector – heightened risks in a difficult environment," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 30, pages 71-84.
    2. Martin Sommer & Allan G Auclair & Armand Fouejieu & Inutu Lukonga & Saad N Quayyum & Amir Sadeghi & Gazi H Shbaikat & Andrew J Tiffin & Bruno Versailles, 2016. "Learning to Live with Cheaper Oil; Policy Adjustment in MENA and CCA Oil-Exporting Countries," IMF Departmental Papers / Policy Papers 16/08, International Monetary Fund.
    3. Andreas Breitenfellner & Jesus Crespo Cuaresma, 2008. "Crude Oil Prices and the USD/EUR Exchange Rate," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
    4. E. Gurvich & I. Prilepskiy., 2016. "The impact of financial sanctions on the Russian economy," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    5. repec:eee:rujoec:v:1:y:2015:i:4:p:359-385 is not listed on IDEAS
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    More about this item


    oil price shock; emerging market economies; oil-exporting countries; oil currencies;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products


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