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

Stephan Barisitz () and Andreas Breitenfellner
Additional contact information
Stephan Barisitz: Oesterreichische Nationalbank, Foreign Research Division, http://www.oenb.at

Focus on European Economic Integration, 2017, issue 1, 33–53

Abstract: 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.

Keywords: oil price shock; emerging market economies; oil-exporting countries; oil currencies (search for similar items in EconPapers)
JEL-codes: O13 Q43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.oenb.at/dam/jcr:25833af4-3601-4de7-852 ... z_breitenfellner.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:onb:oenbfi:y:2017:i:1:b:2

Ordering information: This journal article can be ordered from
Oesterreichische Nationalbank, Documentation Management and Communications Services, Otto-Wagner Platz 3, A-1090 Vienna, Austria

Access Statistics for this article

Focus on European Economic Integration is currently edited by Julia Wörz and Elisabeth Beckmann

More articles in Focus on European Economic Integration from Oesterreichische Nationalbank (Austrian Central Bank) P.O. Box 61, A-1011 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Beckmann ().