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External adjustment in oil exporters: The role of fiscal policy and the exchange rate

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  • Alberto Behar
  • Armand Fouejieu

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, a strong relationship with the fiscal balance or government spending.

Suggested Citation

  • Alberto Behar & Armand Fouejieu, 2018. "External adjustment in oil exporters: The role of fiscal policy and the exchange rate," The World Economy, Wiley Blackwell, vol. 41(3), pages 926-957, March.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:3:p:926-957
    DOI: 10.1111/twec.12593
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    2. Fakhri Hasanov & Jeyhun Mikayilov & Cihan Bulut & Elchin Suleymanov & Fuzuli Aliyev, 2017. "The Role of Oil Prices in Exchange Rate Movements: The CIS Oil Exporters," Economies, MDPI, vol. 5(2), pages 1-18, April.
    3. Yang, Haizhen & Zhang, Mengting & Xiang, Yue & Yang, Yang, 2023. "The balance of payments stages hypothesis: Improvements and new discoveries," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 635-656.
    4. Nenubari John Ikue & Lamin Mohammed Magaji & Samuel Zeb-Omoni & Mohammed, Aminu Usman & Joseph Osaro Denwi, 2021. "Trade Balance and Oil Shocks in African Oil Exporting Countries: A Panel Threshold Regression," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 150-166, October.
    5. Ryota Nakatani, 2017. "External Adjustment in a Resource-Rich Economy: The Case of Papua New Guinea," IMF Working Papers 2017/267, International Monetary Fund.
    6. Mouyad Alsamara & Zouhair Mrabet & Michel Dombrecht & Karim Barkat, 2017. "Asymmetric responses of money demand to oil price shocks in Saudi Arabia: a non-linear ARDL approach," Applied Economics, Taylor & Francis Journals, vol. 49(37), pages 3758-3769, August.

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    More about this item

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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