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Current Account and Precautionary Savings for Exporters of Exhaustible Resources

Author/Editor: Bems, Rudolfs | Carvalho Filho, Irineu E.
Authorized for Distribution: February 1, 2009
Electronic Access: Free Full Text (PDF file size is 526KB)
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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: Exporters of exhaustible resources have historically exhibited higher income volatility than other economies, suggesting a heightened role for precautionary savings. This paper uses a parameterized small open economy model to quantify the role of precautionary savings in economies with exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. Results show that the precautionary motive can generate sizable external sector savings. When aggregated over the sample countries, precautionary savings in 2006 add up to 3.2 percent of GDP. The quantitative importance of the precautionary motive varies considerably across the sample countries and is driven primarily by the weight of exhaustible resource revenues in future income. The parameterized model fares well at capturing current account balances in both cross-section and time-series data.
 
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Series: Working Paper No. 09/33
Subject(s): Export sector | Developed countries | Developing countries | Current account | Exports | Savings | Income | External sector | Economic models | Cross country analysis
Author's keyword(s): exhaustible resources; precautionary savings
 
English  
    Published:   February 1, 2009        
            Format:   Paper
    Stock No:   WPIEA2009033   Pages:   38
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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