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Oil shocks and external balances

Lutz Kilian (), Alessandro Rebucci () and Nikola Spatafora ()

Journal of International Economics, 2009, vol. 77, issue 2, 181-194

Abstract: We provide estimates of the effects of demand and supply shocks in the global crude oil market on several measures of oil exporters' and oil importers' external balances, including the oil trade balance, the non-oil trade balance, the current account, capital gains, and changes in net foreign assets (NFA). First, we show that the effect of oil demand and supply shocks on the merchandise trade balance and the current account, which depending on the source of the shock can be large, depends critically on the response of the non-oil trade balance. Our results provide evidence of an intermediate degree of international financial integration. Second, we document the presence of large and systematic valuation effects in response to these shocks. Valuation effects overall tend to cushion the effect of oil demand and supply shocks on the NFA positions of oil exporters and oil importers. Third, we quantify the overall importance of global business cycle demand shocks as well as oil-market specific demand and supply shocks for external balances.

Keywords: Oil; prices; External; adjustment; Oil; demand; Oil; supply; International; financial; integration; Valuation; effects (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: Oil Shocks and External Balances (2007) Downloads
Working Paper: Oil Shocks and External Balances (2007) Downloads
Working Paper: Oil Shocks and External Balances (2007) Downloads
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