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External Adjustment in Oil Exporters; The Role of Fiscal Policy and the Exchange Rate

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  • Alberto Behar
  • Armand Fouejieu

Abstract

After the decline in oil prices, many oil exporters face the need to improve their external balances. Special characteristics of oil exporters make the exchange rate an ineffective instrument for this purpose and give fiscal policy a sizeable role. These conclusions are supported by regression analysis of the determinants of the current account balance and of the trade balance. The results show little or no relationship with the exchange rate and, especially for the less diversified oil exporters (including the Gulf Cooperation Council), a strong relationship with the fiscal balance or government spending.

Suggested Citation

  • Alberto Behar & Armand Fouejieu, 2016. "External Adjustment in Oil Exporters; The Role of Fiscal Policy and the Exchange Rate," IMF Working Papers 16/107, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/107
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    References listed on IDEAS

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    Cited by:

    1. Ryota Nakatani, 2017. "External Adjustment in a Resource-Rich Economy: The Case of Papua New Guinea," IMF Working Papers 17/267, International Monetary Fund.
    2. repec:gam:jecomi:v:5:y:2017:i:2:p:13-:d:96167 is not listed on IDEAS
    3. repec:taf:applec:v:49:y:2017:i:37:p:3758-3769 is not listed on IDEAS

    More about this item

    Keywords

    Oil exporting countries; Cooperation Council for the Arab States of the Gulf; Exchange rates; Current account balances; Balance of trade; Fiscal policy; Regression analysis; Econometric models; Keywords: Oil exporters; current account; trade balance; fiscal policy; exchange rates; trade volume elasticities; Marshall Lerner conditions;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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