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Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom

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  • Mr. Johannes Wiegand

Abstract

High oil prices have once again led to large external surpluses of oil exporting countries, similar to the 1970s and 1980s. This paper analyzes the extent to which (i) oil exporters use bank deposits to invest these surpluses, and (ii) banks are lending on these funds to emerging market economies. Bank recycling of petro dollars to emerging market economies is found to be almost as important as in the 1970s and 1980s, even though during the current boom, petro dollar bank flows tend to originate in countries like Russia, Libya, or Nigeria rather than in the Middle East. As one consequence, a fall in oil prices could yet again disrupt financing flows to emerging economies. Especially at risk could be countries that rely heavily on bank loans to finance external deficits, many of them in Emerging Europe.

Suggested Citation

  • Mr. Johannes Wiegand, 2008. "Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom," IMF Working Papers 2008/180, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2008/180
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    Citations

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    Cited by:

    1. Anis Chowdhury & Jomo Kwame Sundaram, 2023. "Chronicles of Debt Crises Foretold," Development and Change, International Institute of Social Studies, vol. 54(5), pages 994-1030, September.
    2. Khalid M. Kisswani & Mahelet G. Fikru, 2023. "A Review of Econometric Approaches for the Oil Price-Exchange Rate Nexus: Lessons for ASEAN-5 Countries," Energies, MDPI, vol. 16(9), pages 1-15, April.
    3. Boubakri, Salem & Guillaumin, Cyriac & Silanine, Alexandre, 2019. "Non-linear relationship between real commodity price volatility and real effective exchange rate: The case of commodity-exporting countries," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 212-228.
    4. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    5. Ibrahim Turhan & Erk Hacihasanoglu & Ugur Soytas, 2013. "Oil Prices and Emerging Market Exchange Rates," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S1), pages 21-36, January.
    6. Noble, Leonie, 2023. "Follow the Money: The Political Economy of Petrodollar Accumulation and Recycling," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 284467.

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