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

Alberto Behar () and Armand Fouejieu

No 2016/107, IMF Working Papers from International Monetary Fund

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.

Keywords: WP; fiscal policy; oil exporter; government spending; foreign currency; trade balance response; Oil exporters; current account; trade balance; exchange rates; trade volume elasticities; Marshall Lerner conditions; government trade balance multiplier; current account response; expenditure switching; price effect; trade balance equation; current account elasticity; wage effect; trade balance regression; trade balance elasticity; reversal episode; Current account balance; Oil; Global (search for similar items in EconPapers)
Pages: 45
Date: 2016-06-08
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: External adjustment in oil exporters: The role of fiscal policy and the exchange rate (2018)
Working Paper: External Adjustment in Oil Exporters: The Role of Fiscal Policy and the Exchange Rate (2017)
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