Energy price shocks and current account balances: Evidence from emerging market and developing economies

Mathilde Lebrand, Garima Vasishtha and Hakan Yilmazkuday

Energy Economics, 2024, vol. 129, issue C

Abstract: This paper investigates the effects of real energy price shocks on current account balances of 45 emerging market and developing economies. The investigation is based on country-specific structural vector autoregression models, where alternative specifications and identification schemes are considered for robustness purposes. The empirical results suggest that 1 % of a positive real oil price shock results in up to 0.11 (0.08) percentage points of a cumulative improvement (deterioration) in current account balances of oil exporters (importers) after five years, whereas 1 % of a positive real natural gas price shock results in up to 0.06 (0.04) percentage points of a cumulative improvement (deterioration) in current account balances of natural gas exporters (importers) after five years. Real coal price shocks result in higher current account balances of oil exporters and natural gas exporters, suggesting substitution of coal with oil and natural gas in such cases. When contributions of alternative real energy prices to the variance of current account balances are compared, real oil price shocks dominate those of real natural gas and real coal prices. The empirical results investigating the effects of oil demand versus oil supply shocks on current account balances suggest that oil demand shocks (rather than oil supply shocks) result in similar reactions of current account balances to real oil price shocks, supporting the view that the effects of oil demand shocks are different from those of oil supply shocks. The results are robust to the consideration of country-specific changes in real GDP and real effective exchange rates.

Keywords: Current account balance; Oil prices; Natural gas prices; Coal prices; Energy prices (search for similar items in EconPapers)
JEL-codes: F32 F41 Q41 Q43 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Energy Price Shocks and Current Account Balances: Evidence from Emerging Market and Developing Economies (2023)
Working Paper: Energy Price Shocks and Current Account Balances: Evidence from Emerging Market and Developing Economies (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:129:y:2024:i:c:s0140988323006990

DOI: 10.1016/j.eneco.2023.107201

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