Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries

26 Pages Posted: 12 Sep 2008

See all articles by Jun Il Kim

Jun Il Kim

International Monetary Fund (IMF)

Aqib Aslam

University of Cambridge - Faculty of Economics and Politics

Alun H. Thomas

International Monetary Fund (IMF) - European Department

Date Written: August 2008

Abstract

This paper introduces a methodology for assessing external balance in countries with large stocks of non-renewable resources based on oil stock data, and applies it to selected oil producing countries. The methodology uses a stock approach (instead of the more traditional flow approach) to estimate the equilibrium non-oil current account consistent with optimal consumption smoothing. One of the benefits of the stock approach is that geological data for oil reserves can be used to estimate oil wealth; however, the methodology makes the estimated non-oil current account norm very sensitive to oil price projections. Based on an oil price about US$70 per barrel prevailing in the summer of 2007, the baseline estimates indicate that the non-oil current accounts for most of the countries in the sample are broadly in equilibrium. By the same token, using oil price projections as of the summer of 2008 implies large disparities between the equilibrium non-oil current account position and the medium term forecast for all countries in the sample except for Malaysia.

Keywords: Nonoil sector, Oil producing countries, Current account balances, Oil prices, Exchange rate assessments, Economic models, Working Paper

Suggested Citation

Kim, Jun Il and Aslam, Aqib and Thomas, Alun, Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries (August 2008). IMF Working Paper No. 08/198, Available at SSRN: https://ssrn.com/abstract=1266531

Jun Il Kim (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Aqib Aslam

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Alun Thomas

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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