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

July 1, 2008

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Format: Chicago

Johannes Wiegand. Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom, (USA: International Monetary Fund, 2008) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Bank credit, Banking, Emerging and frontier financial markets, Oil, Oil prices

Keywords: Bank, Emerging market, Oil exporter, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/180
Stock No:

WPIEA2008180
ISBN:

9781451870381
ISSN:

1018-5941

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