On the link between current account and oil price fluctuation in diversified economies: The case of Canada

Blaise Gnimassoun, Marc Joëts and Tovonony Razafindrabe

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: This study revisits the important link between oil prices and current account for oil exporting countries by paying a particulary attention to the time-varying nature of this link. To this end, we rely on an innovative methodology which is the time-varying parameter vector autoregressive (TVP-VAR) model with sign restriction. We find that while an oil supply shock has a non-significant impact on the current account, an oil demand shock has a positive and significant impact which tends to increase over time. In addition, by studying the economic factors underlying the growing evolution of this relationship, we find that, although the propensity to import of oil revenues has a significant negative influence on the pass-through of oil demand shocks on the current account, deepening of the domestic financial market and accumulation of foreign exchange reserve have a significant positive effect.

Keywords: curent account; oil prices; time-varying parameters (search for similar items in EconPapers)
JEL-codes: C32 F32 Q43 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-ene and nep-int
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Related works:
Journal Article: On the link between current account and oil price fluctuations in diversified economies: The case of Canada (2017)
Journal Article: On the link between current account and oil price fluctuations in diversified economies: The case of Canada (2017)
Working Paper: On the link between current account and oil price fluctuations in diversified economies: The case of Canada (2017)
Working Paper: On the link between current account and oil price fluctuations in diversified economies: The case of Canada (2016)
Working Paper: On the link between current account and oil price fluctuation in diversified economies: The case of Canada (2016)
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