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Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries

Author

Listed:
  • Alun H. Thomas
  • Jun I 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.

Suggested Citation

  • Alun H. Thomas & Jun I Kim & Aqib Aslam, 2008. "Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries," IMF Working Papers 08/198, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/198
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    References listed on IDEAS

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    1. 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.
    2. Alonso A Segura Vasi, 2006. "Management of Oil Wealth Under the Permanent Income Hypothesis; The Case of São Tomé and Príncipe," 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 107-128, January.
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    Cited by:

    1. International Monetary Fund, 2012. "Algeria; Selected Issues Paper," IMF Staff Country Reports 12/22, 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. Robert C York & Misa Takebe, 2011. "External Sustainability of Oil-Producing Sub-Saharan African Countries," IMF Working Papers 11/207, International Monetary Fund.
    4. 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.
    5. Alun H. Thomas & Tamim Bayoumi, 2009. "Today versus Tomorrow - The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income," IMF Working Papers 09/248, International Monetary Fund.
    6. Irineu E de Carvalho Filho & Rudolfs Bems, 2009. "Exchange Rate Assessments; Methodologies for Oil Exporting Countries," IMF Working Papers 09/281, International Monetary Fund.

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