## _wp09281

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---

### Introduction and context
- Large current account balances (both deficits and surpluses) became more common; the sum of the absolute value of global current account balances increased as a share of world GDP.
- Average current account surplus of oil exporters increased from about 2½ percent of GDP to almost 15 percent between 2002 and 2008.
- Total current account surplus of oil exporters increased from less than $90 billion (0.3 percent of world GDP) to more than $650 billion (1.1 percent of world GDP).
- With the decline in oil prices since the second semester of 2008, current account balances of oil exporting countries likely to narrow substantially in 2009.
- Paper objective: develop methodologies tailored to oil-exporting countries to assess whether current account fluctuations are “excessive” and how the real exchange rate should respond to external and domestic fundamentals.

### Methodological approaches reviewed
- Price-based approaches (Behavioral Equilibrium Exchange Rate approaches):
  - Reduced form econometric estimates of the equilibrium real exchange rate.
  - Fundamentals: net foreign asset accumulation, sectoral productivity differentials (Balassa-Samuelson effect), size of government, terms of trade shocks.
- Quantity-based approaches (Fundamental Equilibrium Exchange Rate approaches):
  - Estimate medium-term current account benchmarks as function of medium-term characteristics (fiscal position, relative income, dependency ratio, population growth).
- Balance-sheet-based approaches:
  - Determine current account consistent with a benchmark or desired net foreign assets (NFA) position, generalized to allow trends when temporary income (exhaustible resources) is important.

### Stylized features of oil-exporting countries
- Fiscal/current-account linkages:
  - Fiscal balance typically dominated by swings in fiscal revenues related to oil exports and strongly correlated with the current account.
- Intergenerational considerations:
  - Exhaustible resource nature of oil implies transfers across generations; countries often accumulate foreign assets to offset future decreases in oil income and smooth absorption.
- Volatility and export concentration:
  - Exports relatively undiversified; oil prices fluctuate more widely → higher volatility of terms of trade, current accounts as percent of GDP, and income.
- Growth and demographics:
  - Per capita output growth systematically lower than in a sample of oil-importing advanced and emerging countries.
  - Oil exporters exhibit lower dependency ratios and higher population growth rates.
- Data and measurement:
  - Special attention to data requirements and limitations; many oil exporters do not publish IIP and NFA estimates are often derived from BOP flows.

### II. Price-Based Methodologies — approach and econometric findings
- Fundamentals used and expected signs for oil exporters:
  - Commodity terms of trade: higher → real appreciation.
  - Productivity differentials (relative income proxy): higher → real appreciation; caveat that relative income may reflect oil price fluctuations.
  - Net foreign assets (NFA): higher NFA typically → real appreciation; for oil exporters increase in NFA may reflect transformation of underground oil wealth into financial assets (no net wealth increase).
  - Government consumption: higher → real appreciation.
  - Trade restriction index: more restrictions → more appreciated REER.
  - Price controls: prevalence expected to be negatively correlated with appreciation; data limited.
- Stationarity/cointegration results:
  - Panel unit root tests: NFA/GDP, trade, government consumption/GDP, and commodity terms of trade show unit roots; some evidence of unit roots in log(REER) and relative income.
  - Pedroni (1999) tests: for advanced and emerging countries, reject no cointegration in 3/7 statistics for specification including NFA/trade, terms of trade, government consumption and relative income.
  - Inclusion of oil-exporting countries causes failure to reject no cointegration for specification with NFA/trade → treat oil exporters separately.
  - For restricted sample of 10 oil exporters (≥25 years data):
    - Fail to reject no cointegration when including relative income (columns a–c).
    - Reject null for specifications excluding relative income (columns d–g).
    - Strongest evidence for bivariate cointegration REER and terms of trade (column g).
- Estimated equation framework:
  - Panel DOLS / Group-mean DOLS used; Panel DOLS assumes homogeneous coefficients within groups J = {OIL, NOIL}; Group-mean DOLS allows heterogeneous slopes and trends.
- Long-run coefficients (selected precise results, 1980-2007):
  - Commodity terms of trade:
    - Panel DOLS: a 10 percent improvement → ≈ 3 to 4 percent REER appreciation for oil exporters.
    - Group-mean DOLS: a 10 percent improvement → ≈ 3.5 to 5 percent REER appreciation for oil exporters.
    - Reported Group-mean DOLS coefficients (oil-exporting countries, columns a–g): 0.457***, 0.453***, 0.372***, 0.459***, 0.429***, 0.501***, 0.401***.
  - Government consumption to GDP (oil-exporting countries, columns a–g): 3.116***, 2.777***, 2.942***, 2.718***, 2.499***, 2.825***.
  - Relative income (oil-exporting countries): 1.452, 1.371, 1.803***.
  - Net foreign assets to GDP (oil-exporting countries): -0.329***, -0.157** (negative signs interpreted with caution due to data quality and conceptual issues).
- Robustness (country-level):
  - Commodity terms of trade significant in 9/10 oil-exporting countries; expected sign in all 10. Country-specific point estimates range from about 0.11 (Oman) to 1.07 (Algeria).
  - Government consumption significant and positive in 4/10 (Algeria, Norway, Qatar, United Arab Emirates); significant and negative in 2/10 (Oman, Saudi Arabia).
- Implementation options for equilibrium REER:
  - Based on current value of fundamentals: 1ˆ itit ERERYθ= (as presented).
  - Based on expected medium-term/trend values: [ ]2ˆ ittit k ERERE Yθ+ = (as presented).
- Assessment:
  - Strong link between REER and terms of trade for oil exporters; mixed results for other fundamentals; weaknesses reflect data limitations (NFA, productivity, price controls).

### III. Quantity-Based Methodologies — approach and key findings for oil exporters
- Core approach:
  - Relate current account balances to fundamentals: fiscal balance, demographics, oil balance, NFA/GDP, economic growth; regressions typically use trading-partner differences where relevant.
- Adaptations for oil exporters:
  1. Use non-oil fiscal balance to separate oil revenue effects from fiscal policy.
  2. Estimate a specific oil-balance coefficient for oil exporters (and separate coefficient for exporters with limited reserves).
  3. Estimate a specific lagged current account coefficient for oil exporters to capture persistence differences.
- Caveats:
  - Historical data availability and quality limited; measurement of non-oil fiscal balance difficult because “oil sector” definitions vary; non-oil sector may include oil-related activities.
- Regression sample notes:
  - Baseline current account regression (column (1) in Table 2): developed and emerging markets excluding oil exporters (except Norway and Algeria), 1969–2007, four-year averages (last period 2005–2007).
  - Column (2) includes oil exporters; column (3) excludes lagged current account; column (4) substitutes lagged NFA for lagged current account.
  - Sample excludes Angola, Republic of Congo, Equatorial Guinea, Gabon, and Nigeria.
- Quantity-based elasticities and effects (selected):
  - Dependency ratio: higher dependency ratio reduces current account balance.
  - Population growth: a 1 percentage point increase in population growth rate relative to trading partners lowers the current account by about 0.9–1.6 percent of GDP.
  - Per capita GDP growth: a 1 percentage point increase in per capita GDP growth relative to trading partners lowers the current account in developing countries by about 0.04-0.15 percent of GDP.
- Differential responses for oil exporters (selected precise results preserved):
  - A 1 percentage point improvement in the (non-oil) fiscal balance is associated with:
    - Oil countries: coefficients reported 0.385 (0.112) in column (1); 0.233 (0.163) in column (2); 0.202 (0.229) in column (3).
    - MB countries (other countries): 0.149 (0.0401) col (1); 0.119 (0.0435) col (2); 0.270 (0.0655) col (3); 0.253 (0.0601) col (4).
    - P-value H0: equal slopes = 0.044 (col 1), 0.853 (col 2), 0.846 (col 3).
  - Oil balance coefficients:
    - MB countries: 0.167 (0.0646) col (1); 0.170 (0.0718) col (2); 0.266 (0.123) col (3); 0.277 (0.115) col (4).
    - Norway and Algeria: 0.186 (0.097) col (1); 0.534 (0.0858) col (2); 0.593 (0.0766) col (3); 0.586 (0.122) col (4).
    - Oil countries: 0.462 (0.0621) col (1); 0.578 (0.0835) col (2); 0.553 (0.094) col (3).
    - P-value H0: equal slopes = 0.006 (col 1), 0.044 (col 2), 0.070 (col 3).
  - Relative income:
    - Other countries: 0.020 (0.0095) col (1); 0.016 (0.0154) col (2); 0.001 (0.0245) col (3); 0.008 (0.0247) col (4).
    - Oil countries: 0.074 (0.0308) col (1); 0.090 (0.0161) col (2); 0.121 (0.036) col (3).
    - P-value H0: equal slopes = 0.038 (col 1), 0.002 (col 2), 0.001 (col 3).
  - Lagged current account:
    - Other countries: 0.479 (0.0648) col (1); 0.469 (0.0711) col (2).
    - Oil countries: 0.593 (0.0429) col (1).
    - P-value H0: equal slopes = 0.132.
  - Lagged net foreign assets:
    - Other countries: 0.023 (0.0117).
    - Oil countries: -0.009 (0.00956).
    - P-value H0: equal slopes = 0.037.
  - Sample and fit statistics:
    - Observations: 420, 510, 561, 501 (across columns).
    - Number of countries: 51, 64, 64, 64.
    - RMSE: 0.0278, 0.0495, 0.0644, 0.0638.
    - R-squared: 0.6610, 0.7380, 0.5340, 0.5450.
  - Note on differential magnitudes (summary statements preserved):
    - A one-unit change in the (unspecified) explanatory variable yields a 0.4 percentage point increase in the current account balance (in percent of GDP) for oil exporters, and about a 0.12 percentage point increase for other countries. This difference is statistically significant at the 5 percent level.
    - Current account balance responds more strongly to the oil balance in oil exporters than in oil importers.
    - Instrumenting non-oil fiscal balance with its own lag increases the coefficient for non-oil fiscal balance for oil exporting countries (coefficient becomes even larger when instrumented).
    - Among oil exporters, no significant difference found in response of current account to oil balance between countries with lower oil and gas reserves (e.g., Algeria and Norway) and other oil exporters.
    - For oil exporters, coefficient on lagged NFA/GDP is insignificant and negative in some specifications; for oil importers it is positive and significant; poor NFA data quality for oil exporters may cause imprecision.
    - An oil-exporting country with income half the U.S. level will have, on average, a current account balance that is 3–4 percentage points of GDP smaller than that of a country with income equal to the U.S. level. For other countries, the difference is ½–1 percentage point of GDP.

### Balance-sheet-based methodologies — framework, allocation rules, and determinants
- Aggregate intertemporal per-period budget constraint links conventional output Y_t, domestic absorption C_t, net foreign assets B_t, returns, and temporary income Z_t ≥ 0 (exhausted after some T > t).
- Allocation rule: domestic absorption of non-conventional income determined as an annuity d times present value of non-conventional income.
- Current account sequence: CA_t = Z_t - d * PV(Z).
- Allocation rules analyzed (verbatim specifications and implications):
  - Constant real annuity, d = r:
    - Annuity equals net return on PDV of non-conventional income.
    - Domestic absorption exceeds conventional output by constant real amount; economy runs CA surpluses and NFA/GDP increases until t > T and subsequently converges to zero.
  - Constant real per capita annuity, d = r - n:
    - Annuity proportional to population size; maximizes per capita consumption.
    - With positive population growth, prescribed annuity is smaller and CA balances are larger than under constant real annuity; NFA/GDP increases until t > T and converges to zero.
  - Constant real annuity-to-conventional-output ratio, d = r - g:
    - Ratio of domestic-absorption-to-conventional-output constant and exceeds unity.
    - To support constant ratio in growing economy, resources reallocated from present to future; NFA increases during temporary income period and, once temporary income exhausted, collapses to ES approach (NFA/GDP stabilized at an endogenous level and CA proportional to NFA).
- Determinants of CA balances under extended ES:
  - Size of temporary income {T s_t Z = }: uniform per-period increase raises CA balances (only fraction absorbed concurrently; remainder saved).
  - Lifespan of temporary income, T: increasing lifespan reduces external savings; as T → +∞ annuity equals temporary income and no intertemporal reallocation required.
  - Real rate of return, r: higher r increases annuity and decreases CA balance for all allocation rules (magnitude diminishes with T; as T → +∞ the two offsetting effects cancel).
  - Population growth rate, n: affects CA via allocation rule and denominator in CA/GDP ratio; higher n tends to raise CA balances when allocation depends on n, but denominator effects can reduce CA over time; net effect depends on allocation rule and time.
  - Productivity growth rate, a: analogous intuition to population growth; effect depends on whether allocation rule incorporates a.
  - Inflation rate, π: no direct effect on intertemporal allocation (real basis), but absolute size of CA balances consistent with stabilizing NFA at a given level is proportional to inflation.
  - Initial NFA position, B_{t-1}: in ES, CA balance to stabilize NFA/GDP proportional to initial NFA; more negative initial NFA supports larger CA deficit.

### Implementation example: Russia (dynamic extended ES exercise) — preserved inputs and results
- Assumptions and inputs:
  - Real rate of return assumed: 0.06 r = .
  - NFA/GDP ratio for Russia at end-2007: -8.9 percent.
  - WEO projections for real output growth and U.S. inflation used for 2008–2013; beyond 2013 constant growth and inflation assumed.
  - WEO projections used for income from oil and gas as percent of GDP; after 2013, price and extraction quantity assumed constant until exhaustion.
  - Proven reserve-based lifespan from British Petroleum (2008): oil in Russia exhausted in 20 years (exhausted in 2027), gas exhausted in 77 years (exhausted in 2084).
  - Population growth: WEO near-term and UN averages thereafter.
- Time-series inputs (selected years, exact values):
  - 2008: Real GDP growth, percent 7.0 | U.S. CPI inflation, percent 4.2 | Income from oil, percent of GDP 17.1 | Income from gas, percent of GDP 4.7 | Population growth rate -0.5
  - 2009: 5.5 | 1.8 | 15.4 | 5.1 | -0.5
  - 2010: 6.0 | 1.7 | 15.2 | 3.8 | -0.5
  - 2011: 6.0 | 2.1 | 14.6 | 3.3 | -0.5
  - 2012: 5.7 | 2.1 | 14.0 | 2.9 | -0.5
  - 2013: 5.5 | 2.1 | 13.4 | 2.5 | -0.5
  - 2014+: 5.5 | 2.1 | decreasing, exausted in 2027 | decreasing, exausted in 2084 | -0.7
- Dynamic ES results (NFA-stabilizing CA balances under various ES specifications, preserved exactly):
  - Dynamic ES: Constant annuity/output ratio (No temporary oil or gas income): -0.7 | -0.8 | -0.6 | -0.6 | -0.6 | -0.6 | -0.6 (years 2008,2009,2010,2011,2012,2013,2020 respectively)
  - Dynamic ES: Constant annuity/output ratio: 20.0 | 20.6 | 20.3 | 20.5 | 20.9 | 21.3 | 24.4
  - Dynamic ES: Constant real per capital annuity: 5.7 | 5.5 | 5.2 | 5.1 | 5.1 | 5.0 | 6.5
  - Dynamic ES: Constant real annuity: 7.2 | 7.0 | 6.6 | 6.6 | 6.5 | 6.5 | 7.6
- Interpretation preserved:
  - Under allocation rules that incorporate temporary exhaustible income, prescribed NFA-stabilizing CA balances imply additional savings (larger CA surpluses) during periods with exhaustible income.
  - Russia’s projected medium-term output growth being relatively high leads to largest savings when annuity payment is kept constant relative to output (constant annuity/output ratio), though that specification may be of limited economic relevance when stabilizing long-run NFA is large and positive.
  - Negative projected population growth implies constant per capita annuity prescribes smaller CA surpluses than constant real annuity (positive population growth would reverse this).
  - Adding temporary income introduces an increasing trend in NFA/GDP; once income exhausted, NFA/GDP stabilizes at an endogenous level that may exceed its initial value or converge to zero, depending on allocation rule.

### Appendix I — Trade-balance elasticity and closing the current account gap
- Method for closing current account gap:
  - Real exchange rate adjustment computed by dividing the distance to the current account norm by the current account (trade balance) elasticity to the real exchange rate.
- Trade-balance elasticity derivation for oil exporters (verbatim expressions preserved):
  - Oil exports priced in foreign good and oil export supply response to REER close to zero.
  - Derivative and rearrangement (verbatim):
    - ()
    - ()
    - 11
    - 1
    - /
    - nno
    - xm
    - TB
    - X  XM
    - qqqq
    - ηη
    - 
    - ∂
    - = −+   −
    - 
    - ∂
    - 
    - where n_x_η and m_η are elasticity of non-oil exports and imports wrt REER (0_n_x_η< and 0_m_η>).
  - Dividing through by GDP (verbatim):
    - ()
    - ()
    - 1
    - 1
    - /
    - n
    - nxomm
    - TB
    - s    ss
    - q   q   GDP
    - ηη
    - ∂
    - =  −+  −
    - ∂
  - Definitions (verbatim): n_s_, o_s_ and m_s_ refer to share of non-commodity and non-oil exports, commodity and oil exports and imports in GDP respectively.
- Special cases and Marshall-Lerner conditions (verbatim highlights):
  - For non-oil-exporting country (o_s_ = 0):
    - Elasticity under balanced trade: () () 0 0 1 1 / o s n mxm TB TB s q q GDP ηη = = ∂ = +− ∂
    - Marshall-Lerner condition: 10 n xm ηη +− < (sum of price elasticity of exports and imports in absolute value > 1).
  - For oil-only exporter (n_s_ = 0):
    - Elasticity reduces to: () 0 0 1 / o s mm TB TB s q q GDP η = = ∂ = − ∂
    - Marshall-Lerner satisfied as long as 0 m η >.
  - Comparative sensitivity condition (verbatim complex inequality preserved).
- Multilateral consistency:
  - Required: adjustments must be multilaterally consistent since only n-1 independent exchange rates among n currencies.
  - Implementation: all exchange rates adjusted equally or proportionately (Isard and Faruqee, 1998 discussion referenced in source).

### Appendix II — Unit root and cointegration tests (selected results preserved)
- Panel unit root results (Im, Pesaran and Shin (2003)):
  - Log of Real Effective Exchange Rates:
    - 10 Oil countries -0.7970.210.1040.54
    - 33 Oil importers -1.6290.050.3250.63
  - Net Foreign Assets to GDP:
    - 10 Oil countries 1.4490.931.9670.98
    - 33 Oil importers 1.9000.973.1091.00
  - Commodity Terms of Trade:
    - 10 Oil countries 4.4911.004.4891.00
    - 33 Oil importers 7.3891.007.6981.00
  - Relative Income:
    - 10 Oil countries -2.4170.01-0.8470.20
    - 33 Oil importers 0.2030.582.0950.98
- Pedroni (1999) panel cointegration test statistics preserved exactly (selected row values and significance markers retained as in source).

### Synthesis and policy-relevant conclusions
- Oil-exporting countries differ systematically from other countries: fiscal balance dominated by oil revenue fluctuations; exhaustibility raises intergenerational smoothing concerns; lower diversification; more volatile exports.
- Data limitations are acute for oil exporters (most do not publish IIP; NFA estimates often derived from BOP flows), affecting precision of balance-sheet analysis.
- Comparative methodological findings:
  - Price-based approaches: robust link between REER and terms of trade; links with other fundamentals less robust; regression fit modest—likely due to data limitations.
  - Quantity-based approaches: emphasize non-oil fiscal balance; key findings include stronger responsiveness of oil exporters’ current accounts to non-oil fiscal balance and to relative income, and stronger short-run response to oil balance.
  - Balance-sheet (extended ES) approaches: must allow for long-term NFA trends to accommodate temporary exhaustible income and oil price volatility; oil exporters should generally run larger CA surpluses than exercises targeting a static benchmark NFA level; assessment sensitive to time-path of exhaustible income and intertemporal allocation rule.
- Policy implication (verbatim emphasis preserved):
  - External sector assessment for oil countries should be based on a longer-term time horizon than for other economies, accounting explicitly for exhaustible resource income size, lifespan, and intertemporal distribution rule.

*Italic source attribution: _wp09281 - References (IMF Working Paper content provided).*

### References .............................................................................................................

### References

### Introduction and context
- Recent years saw large current account balances (both deficits and surpluses) become more common and the sum of the absolute value of global current account balances increased as a share of world GDP (e.g. Faruqee and Lee, 2008).
- The average current account surplus of oil exporters increased from about 2½ percent of GDP to almost 15 percent between 2002 and 2008.
- The total current account surplus of oil exporters increased from less than $90 billion (0.3 percent of world GDP) to more than $650 billion (1.1 percent of world GDP).
- With the decline in oil prices since the second semester of 2008, the current account balances of oil exporting countries are likely to narrow substantially in 2009.
- The paper aims to develop methodologies adequate to the specifics of oil-exporting countries, addressing whether current account fluctuations are “excessive” and how the real exchange rate should respond to external and domestic fundamentals.

### Methodological approaches reviewed
- Price-based approaches (Behavioral Equilibrium Exchange Rate approaches):
  - Provide reduced form econometric estimates of the equilibrium real exchange rate.
  - Incorporate variables including net foreign asset accumulation, differentials in sectoral productivity (Balassa-Samuelson effect), size of government, and terms of trade shocks.
- Quantity-based approaches (Fundamental Equilibrium Exchange Rate approaches):
  - Estimate medium-term current account benchmarks as a function of medium-term characteristics (fiscal position, relative income, dependency ratio, population growth).
- Balance-sheet-based approaches:
  - Determine the current account consistent with a benchmark or desired net foreign assets position.

### Stylized features and empirical regularities of oil-exporting countries
- Fiscal and current-account linkages:
  - The fiscal balance in oil-exporting countries is typically dominated by swings in fiscal revenues related to oil exports and is strongly correlated with the current account.
- Intergenerational considerations:
  - Because oil revenues derive from an exhaustible resource, transfers across generations play an important role in ensuring intergenerational equity; countries often accumulate foreign assets to offset future decreases in oil income and smooth absorption.
- Volatility and export concentration:
  - Oil-exporting countries are exposed to wider fluctuations in external accounts because exports are relatively undiversified and oil prices fluctuate more widely than prices of other goods; this is reflected in higher volatility of terms of trade, current accounts as a percent of GDP, and income.
- Growth and demographic differences (resource curse literature):
  - Per capita output growth in oil exporting countries is systematically lower than in a sample of oil-importing advanced and emerging countries.
  - Oil exporters exhibit lower dependency ratios and higher population growth rates.
- Data and measurement:
  - The paper pays special attention to data requirements and limitations of the available statistical record for oil-exporting countries.

### Policy questions and objectives
- Key questions the methodologies aim to address:
  - Are current account fluctuations in oil-exporting countries “excessive”?
  - How should the real exchange rate respond to the evolution of external and domestic fundamentals?
  - What macroeconomic policy responses are appropriate for oil-exporting countries facing fluctuations in oil prices and global economic activity?
- Objective of the paper:
  - To propose exchange-rate and current-account assessment methodologies tailored to the specific characteristics of oil-exporting countries.

*Italic source attribution: _wp09281 - References (IMF Working Paper content provided)._*

### section III presents the quantity based approach; section IV presents the balance sheet based

### _wp09281 - section III presents the quantity based approach; section IV presents the balance sheet based

### II. Price-Based Methodologies — approach and fundamentals
- Price-based approaches estimate an equilibrium real exchange rate (REER) as a function of fundamentals and compute the adjustment as the difference between the estimated equilibrium REER and its current value.
- Regression-based approaches typically assume exchange rate misalignments average out over time; analyst judgment can be introduced by selecting sample periods or excluding special circumstances.
- Fundamentals used (following Lee and others (2008)) and their expected relationships to the REER for oil-exporting countries:
  - Commodity terms of trade: Higher terms of trade → real appreciation (higher relative price of non-tradables).
  - Productivity differentials (Balassa-Samuelson): Higher tradable-sector productivity → real appreciation. Proxy used: ratio of GDP per capita (PPP) relative to the United States (relative income) due to lack of sectoral productivity data. Caveat: relative income may reflect oil price fluctuations more than traded/non-traded productivity differentials.
  - Net foreign assets (NFA): Higher NFA typically → real appreciation, but for oil exporters an increase in NFA may reflect transformation of underground oil wealth into financial assets (no net wealth increase). A more appropriate fundamental might be NFA plus underground oil wealth. Few oil exporters publish IIP; data limitations hinder NFA estimation.
  - Government consumption: Generally expected to increase demand for non-tradables → real appreciation.
  - Trade restriction index: More trade restrictions → higher domestic prices → more appreciated exchange rate (data drawn and extended from Wacziarg and Welch (2003)).
  - Price controls: Prevalence (share of administered prices in CPI basket) expected to be negatively correlated with real appreciation; variable unavailable for oil exporters (EBRD measure limited to transition economies).

### II.B Econometric setup and estimation
- Stationarity/cointegration:
  - Panel unit root tests show strong evidence that NFA/GDP and trade; government consumption/GDP; and commodity terms of trade have unit roots; some evidence of unit roots in log(REER) and relative income.
  - For advanced and emerging countries (Lee et al. sample), Pedroni (1999) tests reject no cointegration in 3 out of 7 statistics for specification including NFA/trade, terms of trade, government consumption and relative income.
  - Inclusion of oil-exporting countries causes tests to fail to reject no cointegration for specification with NFA/trade — suggests treating oil exporters separately.
  - For a restricted sample of 10 oil-exporting countries with at least 25 years of data, panel cointegration tests:
    - Fail to reject no cointegration for specifications including relative income (columns a-c).
    - Reject null for specifications excluding relative income (columns d-g).
    - Strongest evidence of cointegration for bivariate cointegrating vector including REER and terms of trade (column g).
- Estimated equation (Panel DOLS / Group-mean DOLS framework):
  - Equation form: ( ) ln() iti iti itiitit reerYxd LYvμθ β= + + + ∆+  (as presented in source).
  - Panel DOLS assumes homogeneous coefficients within groups J = {OIL, NOIL}.
  - Group-mean DOLS estimates country-specific DOLS and averages coefficients across groups; allows heterogeneous slopes and trends.

### II.B Key econometric findings (long-run coefficients)
- Commodity terms of trade:
  - For oil-exporting countries, a 10 percent improvement in commodity terms of trade is associated with an equilibrium REER appreciation of about 3 to 4 percent (Panel DOLS).
  - Group-mean DOLS: a 10 percent improvement associated with about 3.5 to 5 percent REER appreciation for oil exporters; often indistinguishable from other countries.
- Government consumption:
  - An increase in government consumption (relative to trading partners) of one percent of GDP is associated with an equilibrium REER appreciation of about 2¾-3¼ percent for all countries (Group-mean DOLS); no rejection of equal group means between oil exporters and others in many specifications.
- Relative income:
  - An improvement in relative income of 1 percentage point is associated with an equilibrium REER appreciation of about 1½ percentage points, with no statistically significant difference across groups — but this result is discounted because panel cointegration could not be rejected for oil exporters when including this variable.
- Net foreign assets:
  - Coefficient on net foreign assets is negative for oil-exporting countries in the estimations. Interpreted as possibly due to poor quality of NFA data for oil exporters and conceptual issues in interpreting increases in NFA as increases in overall wealth.
- Group-mean DOLS detailed coefficients (selected reported values, 1980-2007):
  - Commodity terms of trade (oil-exporting countries, columns a–g): 0.457***, 0.453***, 0.372***, 0.459***, 0.429***, 0.501***, 0.401*** (asterisks denote statistical significance levels as in source).
  - Government consumption to GDP (oil-exporting countries, columns a–g): 3.116***, 2.777***, 2.942***, 2.718***, 2.499***, 2.825*** (statistical significance as in source).
  - Net foreign assets to GDP (oil-exporting countries): -0.329***, -0.157** (statistical significance as in source).
  - Relative income (oil-exporting countries): 1.452, 1.371, 1.803*** (statistical significance as in source).

### II.C Robustness (country-level evidence for oil exporters)
- Commodity terms of trade:
  - Statistically significant in 9 out of 10 oil-exporting countries; expected sign in all 10.
  - Country-specific point estimates range from about 0.11 (Oman) to 1.07 (Algeria).
- Government consumption:
  - Statistically significant and positive for 4 out of 10 countries (Algeria, Norway, Qatar, United Arab Emirates).
  - Statistically significant and negative for 2 out of 10 countries (Oman, Saudi Arabia).

### II.D Implementation and limitations
- Implementation options for estimated equilibrium REER:
  - Based on current value of fundamentals: 1ˆ itit ERERYθ= (as presented).
  - Based on expected medium-term or trend values of fundamentals: [ ]2ˆ ittit k ERERE Yθ+ = (as presented).
- Overall assessment:
  - Time-series methods identify a strong link between REER and terms of trade for oil exporters.
  - Mixed results for significance and fit of other explanatory variables.
  - Weaknesses largely reflect data limitations: lack of reliable NFA data, limited productivity variables, and limited information on scope and time variation of price controls.

---

### III. Quantity-Based Methodologies — approach and adaptations for oil exporters
- Quantity-based approaches relate current account balances to fundamentals (differences from trading partner averages when relevant). Key fundamentals include fiscal balance, demographics, oil balance, net foreign assets to GDP, and economic growth.
- Adaptations for oil exporters (relative to Lee and others (2008) baseline):
  1. Use non-oil fiscal balance to separate effects of oil revenues and fiscal policy on the current account.
  2. Estimate a specific oil-balance coefficient for oil exporters (and a separate coefficient for exporters with more limited reserves) to capture intergenerational transfers and delayed consumption/investment responses to oil income.
  3. Estimate a specific lagged current account coefficient for oil exporters to capture differences in current account persistence.
- Caveats:
  - Historical data availability and quality are limited for several oil exporters; measurement of the non-oil fiscal balance is difficult because definitions of the “oil sector” vary across countries.
  - The non-oil sector may include oil-related activities (petrochemicals, fertilizers), implying a stronger link between the current account and oil prices than direct oil sales suggest — potentially yielding a higher positive coefficient on the oil balance in regressions.
- Regression sample notes:
  - Baseline current account regression (column (1) in Table 2 of source) covers developed and emerging markets excluding oil exporters (except Norway and Algeria), spans 1969–2007 with four-year averages (last period 2005–2007).
  - Column (2) includes oil exporters; column (3) excludes lagged current account; column (4) substitutes lagged NFA for lagged current account.
  - Regression estimates are generally statistically and economically significant with expected signs; fit is generally good (better when lagged current account included).
  - Sample excludes Angola, Republic of Congo, Equatorial Guinea, Gabon, and Nigeria (based on average size and GDP per capita during the sample period).

### III. Quantity-Based Findings (selected elasticities and effects)
- Variables with similar effects for oil exporters and importers:
  - Dependency ratio (population above age 65 / population 30–64): higher dependency ratio reduces current account balance.
  - Population growth: a 1 percentage point increase in population growth rate relative to trading partners lowers the current account by about 0.9–1.6 percent of GDP.
  - Per capita GDP growth: a 1 percentage point increase in per capita GDP growth relative to trading partners lowers the current account in developing countries by about 0.04-0.15 percent of GDP.
- Variables with different effects between oil exporters and others (beginning statement in source):
  - The source states there are statistically and economically significant differences between oil exporters and other countries for some variables and begins to report: “A 1 percentage point improvement in the (non-oil) fiscal balance is associated with a” — the provided excerpt ends here and does not include the numeric coefficient or subsequent text. No further numeric value for this effect is present in the supplied content.

*Source: Extract from the provided IMF working paper content unit (_wp09281 — sections II and III as supplied).*

### 0.4 percentage point increase in the current account balance in percent of GDP for oil

### 0.4 percentage point increase in the current account balance in percent of GDP for oil exporters, and to an increase of about 0.12 percentage point for other countries

### Key empirical findings
- A one-unit change in the (unspecified) explanatory variable yields a 0.4 percentage point increase in the current account balance (in percent of GDP) for oil exporters, and about a 0.12 percentage point increase for other countries. This difference is statistically significant at the 5 percent level.
- The current account balance responds more strongly to the oil balance in oil exporters than in oil importers, consistent with higher propensity to save out of an oil price windfall and the larger role of oil in oil exporters.
- The relation between fiscal balance and the current account balance is stronger in less financially developed countries.
- Instrumenting non-oil fiscal balance with its own lag increases the coefficient for non-oil fiscal balance for oil exporting countries (note in text: coefficient becomes even larger when instrumented).
- Among oil exporters, no significant difference was found in the response of the current account to the oil balance between countries with lower oil and gas reserves (e.g., Algeria and Norway) and other oil exporters.
- For oil exporters, the coefficient on lagged net foreign assets to GDP is insignificant and negative in some specifications, whereas for oil importers it is positive and statistically significant; data quality on net foreign assets for oil exporters is poor and may cause imprecision.
- An increase in relative income (country j per capita GDP PPP relative to the United States) raises the current account balance significantly more in oil countries than in other countries:
  - An oil-exporting country with income half the U.S. level will have, on average, a current account balance that is 3–4 percentage points of GDP smaller than that of a country with income equal to the U.S. level.
  - For other countries, the difference is ½–1 percentage point of GDP.
- The difference in the effect of relative income for oil countries is due to within-country variation in relative income, is robust to exclusion of new oil countries such as Kazakhstan and Republic of Azerbaijan, but fades away if the sample excludes only Kuwait and Qatar.

### Medium-run determinants (selected estimates from Table 2; sample 1969–2007, four-year averages)
- Non-oil fiscal balance (coefficients; standard errors in parentheses):
  - MB countries: 0.149 (0.0401) in column (1); 0.119 (0.0435) in column (2); 0.270 (0.0655) in column (3); 0.253 (0.0601) in column (4).
  - Oil countries: 0.385 (0.112) in column (1); 0.233 (0.163) in column (2); 0.202 (0.229) in column (3).
  - P-value H0: equal slopes = 0.044 (col 1), 0.853 (col 2), 0.846 (col 3).
- Oil balance (coefficients; standard errors in parentheses):
  - MB countries: 0.167 (0.0646) col (1); 0.170 (0.0718) col (2); 0.266 (0.123) col (3); 0.277 (0.115) col (4).
  - Norway and Algeria: 0.186 (0.097) col (1); 0.534 (0.0858) col (2); 0.593 (0.0766) col (3); 0.586 (0.122) col (4).
  - Oil countries: 0.462 (0.0621) col (1); 0.578 (0.0835) col (2); 0.553 (0.094) col (3).
  - P-value H0: equal slopes = 0.006 (col 1), 0.044 (col 2), 0.070 (col 3).
- Relative income (coefficients; standard errors in parentheses):
  - Other countries: 0.020 (0.0095) col (1); 0.016 (0.0154) col (2); 0.001 (0.0245) col (3); 0.008 (0.0247) col (4).
  - Oil countries: 0.074 (0.0308) col (1); 0.090 (0.0161) col (2); 0.121 (0.036) col (3).
  - P-value H0: equal slopes = 0.038 (col 1), 0.002 (col 2), 0.001 (col 3).
- Lagged current account:
  - Other countries: 0.479 (0.0648) col (1); 0.469 (0.0711) col (2).
  - Oil countries: 0.593 (0.0429) col (1).
  - P-value H0: equal slopes = 0.132.
- Lagged net foreign assets:
  - Other countries: 0.023 (0.0117).
  - Oil countries: -0.009 (0.00956).
  - P-value H0: equal slopes = 0.037.
- Other reported sample statistics and controls:
  - Observations: 420, 510, 561, 501 (across columns).
  - Number of countries: 51, 64, 64, 64.
  - RMSE: 0.0278, 0.0495, 0.0644, 0.0638.
  - R-squared: 0.6610, 0.7380, 0.5340, 0.5450.
- Notes: Oil countries in regressions are: Algeria, Azerbaijan, Kingdom of Bahrain, I.R. of Iran, Kazakhstan, Kuwait, Libya, Oman, Qatar, Russia, Saudi Arabia, United Arab Emirates, and Rep. Bolívariana de Venezuela.

### Balance sheet-based methodologies: framework and allocation rules
- Purpose: determine the real exchange rate change required to bring net foreign assets (NFA) to a desired benchmark, generalized to allow for trends in NFA when temporary income (e.g., exhaustible resource income) is important.
- Aggregate intertemporal per-period budget constraint expressed in the text (equation (1)) links conventional output (Y_t), domestic absorption (C_t), net foreign assets (B_t), returns, and temporary income (Z_t ≥ 0, exhausted after some T > t).
- Additional restriction: impose an allocation rule based on an annuity d times the present value of non-conventional income to determine domestic absorption of non-conventional income (equation (2)).
- Current account (CA) sequence derived as difference between period’s non-conventional income and the annuity payment (equation (3)).

Allocation rules analyzed:
- Constant real annuity, d = r:
  - Annuity equals net return on present discounted value of non-conventional income.
  - Domestic absorption exceeds conventional output by a constant real amount; economy runs CA surpluses and NFA (as share of GDP) increases until t > T and subsequently converges to zero.
- Constant real per capita annuity, d = r - n:
  - Annuity proportional to population size; maximizes per capita consumption.
  - With positive population growth, prescribed annuity is smaller and CA balances are larger than under constant real annuity; NFA/GDP increases until t > T and converges to zero.
- Constant real annuity-to-conventional-output ratio, d = r - g:
  - Ratio of domestic-absorption-to-conventional-output is constant and exceeds unity.
  - To support constant ratio in growing economy, resources reallocated from present to future; NFA increases during temporary income period and, once temporary income is exhausted, collapses to the ES approach (NFA/GDP stabilized at an endogenous level and CA proportional to NFA).

Determinants of CA balances under the extended ES framework (effects summarized):
- Size of temporary income, {T s_t Z = }: uniform per-period increase raises CA balances (only fraction absorbed concurrently; remainder saved).
- Lifespan of temporary income, T: increasing lifespan (same aggregate present value spread over more periods) reduces external savings; as T → +∞, annuity equals temporary income and no intertemporal reallocation required.
- Real rate of return, r: higher r increases annuity and decreases CA balance for all allocation rules (magnitude diminishes with T; as T → +∞ the two offsetting effects cancel).
- Population growth rate, n: affects CA via allocation rule and denominator in CA/GDP ratio; higher n tends to raise CA balances when allocation depends on n, but denominator effects can reduce CA over time; net effect depends on allocation rule and time.
- Productivity growth rate, a: analogous intuition to population growth; effect depends on whether allocation rule incorporates a.
- Inflation rate, π: no direct effect on intertemporal allocation (real basis), but absolute size of CA balances consistent with stabilizing NFA at a given level is proportional to inflation.
- Initial NFA position, B_{t-1}: in ES, CA balance to stabilize NFA/GDP proportional to initial NFA; more negative initial NFA supports larger CA deficit.

### Implementation example: Russia (dynamic extended ES exercise)
- Assumptions and inputs:
  - Real rate of return assumed: 0.06 r = .
  - NFA/GDP ratio for Russia at end-2007: -8.9 percent.
  - WEO projections for real output growth and U.S. inflation used for 2008–2013; beyond 2013 constant growth and inflation assumed.
  - WEO projections used for income from oil and gas as percent of GDP; after 2013, price and extraction quantity assumed constant until exhaustion.
  - Proven reserve-based lifespan from British Petroleum (2008): oil in Russia exhausted in 20 years (exhausted in 2027), gas exhausted in 77 years (exhausted in 2084).
  - Population growth used from WEO near-term and UN averages thereafter.
- Time-series inputs summarized in Table 3 (selected years; values preserved exactly):
  - Year \ Variable: Real GDP growth, percent | U.S. CPI inflation, percent | Income from oil, percent of GDP | Income from gas, percent of GDP | Population growth rate
  - 2008: 7.0 | 4.2 | 17.1 | 4.7 | -0.5
  - 2009: 5.5 | 1.8 | 15.4 | 5.1 | -0.5
  - 2010: 6.0 | 1.7 | 15.2 | 3.8 | -0.5
  - 2011: 6.0 | 2.1 | 14.6 | 3.3 | -0.5
  - 2012: 5.7 | 2.1 | 14.0 | 2.9 | -0.5
  - 2013: 5.5 | 2.1 | 13.4 | 2.5 | -0.5
  - 2014+: 5.5 | 2.1 | decreasing, exausted in 2027 | decreasing, exausted in 2084 | -0.7
- Static ES 2013 NFA-stabilizing CA (reported in Table 4): n/a for most years and -0.6 for 2013 (static ES row).
- Dynamic ES results (Table 4) — NFA-stabilizing CA balances under various ES specifications (preserved exactly):
  - Dynamic ES: Constant annuity/output ratio (No temporary oil or gas income): -0.7 | -0.8 | -0.6 | -0.6 | -0.6 | -0.6 | -0.6 (for years 2008,2009,2010,2011,2012,2013,2020 respectively)
  - Dynamic ES: Constant annuity/output ratio: 20.0 | 20.6 | 20.3 | 20.5 | 20.9 | 21.3 | 24.4
  - Dynamic ES: Constant real per capital annuity: 5.7 | 5.5 | 5.2 | 5.1 | 5.1 | 5.0 | 6.5
  - Dynamic ES: Constant real annuity: 7.2 | 7.0 | 6.6 | 6.6 | 6.5 | 6.5 | 7.6
- Interpretation of Russia exercise:
  - Under all allocation rules that incorporate temporary exhaustible income, the prescribed path of NFA-stabilizing CA balances implies additional savings (larger CA surpluses) during periods with exhaustible income.
  - Because Russia’s projected medium-term output growth is relatively high, savings are largest when the annuity payment is kept constant relative to output (constant annuity/output ratio), though that specification may be of limited economic relevance when stabilizing long-run NFA is large and positive.
  - Negative projected population growth implies that constant per capita annuity prescribes smaller CA surpluses than constant real annuity (a positive population growth rate would reverse this relationship).
  - Adding temporary income introduces an increasing trend in NFA/GDP; once income is exhausted, NFA/GDP stabilizes at an endogenous level that may exceed its initial value or converge to zero, depending on allocation rule.

### Synthesis and policy-relevant conclusions
- Oil-exporting countries differ systematically from other countries: fiscal balance dominated by oil revenue fluctuations; exhaustibility raises intergenerational smoothing concerns; lower diversification; more volatile exports.
- Data limitations are acute for oil exporters (most do not publish international investment position; NFA estimates often derived from balance of payments flows), and these affect precision of balance-sheet analysis.
- The paper proposes and contrasts three tailored methodologies for real exchange rate/external assessment for oil exporters:
  - Price-based approaches: robust link found between real exchange rate and terms of trade; links with other fundamentals less robust; overall regression fit modest—likely due to data limitations (relative productivity, net foreign assets, price controls).
  - Quantity-based (medium-term CA benchmark) approaches: emphasize use of non-oil fiscal balance (fiscal balance net of oil revenues); key findings include stronger responsiveness of oil exporters’ current accounts to non-oil fiscal balance and to relative income, and stronger short-run response to oil balance.
  - Balance-sheet (extended ES) approaches: must allow for long-term NFA trends to accommodate temporary exhaustible income and oil price volatility; oil exporters should generally run larger CA surpluses than exercises targeting a static benchmark NFA level; assessment sensitive to time-path of exhaustible income and intertemporal allocation rule.
- Policy implication: external sector assessment for oil countries should be based on a longer-term time horizon than for other economies, accounting explicitly for exhaustible resource income size, lifespan, and intertemporal distribution rule.

*Source: IMF Working Paper (_wp09281) — content as provided in the supplied PDF excerpt.*

### Appendix I: Implementation of quantity-based approaches to real exchange rate

### Appendix I: Implementation of quantity-based approaches to real exchange rate assessment

### Method for closing the current account gap
- The final step involves calculating the real exchange rate adjustment that would close the gap between the estimated current account norm and the underlying current account of each economy.
- The adjustment is computed by dividing the distance to the current account norm by the current account (trade balance) elasticity to the real exchange rate.

### Trade-balance elasticity derivation for oil exporters
- The current account elasticity to the real exchange rate for an oil exporting country depends on:
  - the shares of oil and non-oil exports and imports to GDP, and
  - the elasticity of non-oil exports and imports relative to the REER.
- Key definitions and notation:
  - TB is the trade balance expressed in terms of the domestic good;
  - nX are non-oil exports;
  - oX are exports of oil;
  - q is the real exchange rate denoted as the amount of the foreign goods needed to purchase a unit of domestic good (i.e. an increase in q represents a real appreciation).
- Source text includes the statement and formula fragment:
  - "To derive it, note that oil exports are priced in terms of the foreign good and the oil export supply response to a change in the real exchange rate is close to zero.
23
11
no
TBXXM
qq
=+−
"
- First-order condition (as presented in the source):
  - ", 
where TB is the trade balance expressed in terms of the domestic good;
n
X
are non-oil exports 
of; 
o
X
are exports of oil; q is the real exchange rate denoted as the amount of the foreign 
goods needed to purchase a unit of domestic good (i.e. an increase in q represents a real 
appreciation)."
- Derivative and rearrangement (as presented exactly):
  - "Taking the derivative of the trade balance with respect to the real exchange rate and 
rearranging terms, then: 
()
()
11
1
/
nno
xm
TB
X  XM
qqqq
ηη

∂
= −+   −

∂

, 
where  
n
x
η
 and 
m
η
 are the elasticity of non-oil exports and imports with respect to the real 
exchange rate respectively (
0
n
x
η<
 and 
0
m
η>
)."

- Dividing through by GDP (preserving the source expression exactly):
  - "Dividing through by GDP, we have: 
()
()
1
1
/
n
nxomm
TB
s    ss
q   q   GDP
ηη
∂
=  −+  −
∂
,"

- Definitions of shares (verbatim):
  - "where  
n
s
, 
o
s
and 
m
s
 refer to the share of non-commodity and non-oil exports, commodity 
and oil exports and imports in GDP respectively."

- Interpretive statement (verbatim):
  - "This formula implies that for given export and import elasticities, the impact of the real 
exchange rate on the current account balance will be proportional to openness: the more open 
the economy, the smaller is the required real exchange rate adjustment to correct a given 
current account imbalance."

### Special cases and Marshall-Lerner conditions
- Under balanced trade (source wording):
  - "Under balanced trade, 
no m
ss s+=
, and we can write the elasticity of the trade balance with 
respect to the real exchange rate as: 
()
()
0
1
1
/
n
no
mxm
nono
TB
ss
TB
s
q   q   GDPssss
ηη
=

∂
=−    +−

∂++
"
- Non-oil-exporting country (verbatim):
  - "For a country that does not export oil, 
0
o
s=
, and the elasticity of the trade balance with 
respect to the real exchange rate, under balance trade, is: 
()
()
0
0
1
1
/
o
s
n
mxm
TB
TB
s
q   q   GDP
ηη
=
=
∂
= +−
∂
"
  - Condition for depreciation to have positive impact (Marshall-Lerner, verbatim):
    - "and, since the real exchange rate is defined as 
1/q
, and the condition for a depreciation to 
have a positive impact in the trade balance (Marshall-Lerner condition) is satisfied if 
10
n
xm
ηη
+−<
 or more familiarly, if the sum of price elasticity of exports and imports (in 
absolute value) must be greater than 1."

- Oil-only exporter (verbatim):
  - "For a country that exports only oil, 
0
n
s=
, the same elasticity reduces to: 
()
0
0
1
/
o
s
mm
TB
TB
s
q   q   GDP
η
=
=
∂
= −
∂
, 
Therefore for a country that only exports oil, the Marshall-Lerner condition is satisfied as 
long as 
0
m
η>
."

- Comparative sensitivity condition (verbatim):
  - "For a given set of elasticities with respect to the real exchange rate, the sensitivity of the trade 
balance to GDP with respect to the real exchange rate will be more negative than for an oil 
importing countries when: 
()()
()
0
00
11
10
//
o
s
n
ox
TBTB
TBTB
s
q   q   GDPq   q   GDP
η
=
==
∂∂
<⇔ +>
∂∂

This condition will hold when the absolute value of the price elasticity of non-oil exports is 
less than one, i.e. 
1
n
x
η<
"

### Multilateral consistency
- Requirement (verbatim):
  - "The required exchange rate adjustment for each country needs to be made multilaterally 
consistent, since there can only be n-1 independent exchange rates among n currencies."
- Implementation approach (verbatim):
  - "To guarantee multilateral consistency, all exchange rates are adjusted equally or proportionately (see Isard and Faruqee, 1998 for a discussion of the multilateral consistency issue)."

### Appendix II — Unit root and cointegration tests (selected results)
- Appendix Table 1A: Unit Root Test on Real Exchange Rate and Fundamentals (1980-2007)
  - Notes (verbatim):
    - "P-values for the null hypothesis of unit root are calculated by Stata routine dfuller assuming 3 lags and a trend. The results for 43 individual oil importing advanced and emerging countries are available from the authors upon request."
  - "Re je ctions  at 5%" reported rows:
    - "Oil importing countries 0.0700.0470.0000.0700.0700.1630.2090.2090.6740.0930.0470.163"
    - "Oil exporting countries 0.0670.1330.0000.0000.0670.1330.2670.2001.0000.1330.0000.200"
- Appendix Table 1B: Panel Unit Root Tests (Im, Pesaran and Shin (2003) tests; H0: for all countries, unit root)
  - Selected panel results (preserving numbers and formatting as in source):
    - "Log of Real Effective Exchange Rates
10 Oil countries-0.7970.210.1040.54
33 Oil importers-1.6290.050.3250.63"
    - "Net Foreign Assets to GDP
10 Oil countries1.4490.931.9670.98
33 Oil importers1.9000.973.1091.00"
    - "Commodity Terms of Trade
10 Oil countries4.4911.004.4891.00
33 Oil importers7.3891.007.6981.00"
    - "Relative Income
10 Oil countries-2.4170.01-0.8470.20
33 Oil importers0.2030.582.0950.98"
  - Notes (verbatim):
    - "The criterium to select countries for the panel unit root tests was availability of at least 20 years of data for the variables of interest in the 1980-2007 period. The 10 oil countries are:  Algeria, Ecuador, Kuwait, Norway, Oman, Qatar, Saudi Arabia, Trinidad and Tobago, United Arab Emirates, and República Bolivariana de Venezuela. The 33 advanced and emerging oil-importing countries are Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong S.A.R, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Taiwan, Province of China, United Kingdom and United States."
    - "The panel unit root tests were performed with the RATS routine ipshin, using 3 lags."

### Panel cointegration tests (Appendix Table 2)
- Test framework and included variables (verbatim):
  - Variables included: Log of REER; Commodity Terms of Trade; Government Consumption to GDP; Net Foreign Assets to Trade; Net Foreign Assets to GDP; Relative Income (various specifications).
- Pedroni (1999) test statistics and remarks (preserving values and symbols exactly as in source):
  - "panel v-stat0.361.300.770.920.541.321.351.392.28
panel rho-stat2.683.001.221.231.110.670.39-0.09-1.37*
panel pp-stat-1.27*-0.58-0.97-0.98-0.31-1.35*-1.69 **-1.67 **-2.45 **
panel adf-stat-3.37 **-1.02-1.70 **-1.15-0.25-3.43 **-1.94 **-2.21 **-2.99 **
group rho-stat4.294.862.372.312.241.901.601.190.19
group pp-stat-0.940.02-0.52-0.700.23-0.73-1.16-0.95-1.56*
group adf-stat-3.05 **-1.84 **-1.63*-1.10-0.29-3.50 **-2.07 **-2.10 **-2.64 **
Number of countries334310101010101010
Number of observations10751075250250250250250250250"
- Hypothesis:
  - "H0: No panel cointegration"
- Test implementation note (verbatim):
  - "The panel cointegrations tests were performed with the RATS routine pancoint, using a maximum lag of 4 and heterogeneous trends. (*) denotes rejection of the null of no cointegration at the 10% significance level; (**) denotes rejection of the null of no cointegration at the 5% level."

### Sample composition (Appendix Table 3)
- Table 1, Panel DOLS regressions
  - Oil countries listed: "Algeria, Azerbaijan, Ecuador, Indonesia, Islamic Republic of Iran, Kazakhstan, Kuwait, Libya, Norway, Oman, Qatar, Russia, Saudi Arabia, Trinidad and Tobago, United Arab Emirates, and República Bolivariana de Venezuela."
  - Other countries listed: "Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, People's Republic of China, Colombia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong S.A.R., Hungary, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Pakistan, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Province of China, Thailand, Turkey, United Kingdom and United States."
- Table 1, Group-Mean DOLS regressions
  - Oil countries listed: "Algeria, Ecuador, Kuwait, Norway, Oman, Qatar, Saudi Arabia, Trinidad and Tobago, United Arab Emirates, and República Bolivariana de Venezuela."
  - Other countries listed: "Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong S.A.R., India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Taiwan, Province of China, United Kingdom and United States."
- Table 2 sample composition
  - Oil countries listed: "Algeria, Azerbaijan, Kingdom of Bahrain, I.R. of Iran, Kazakhstan, Kuwait, Libya, Oman, Qatar, Russia, Saudi Arabia, United Arab Emirates, and Rep. Bolívariana de Venezuela."
  - Other countries listed: "Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Norway, Pakistan, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, UK, USA."

*Source: Appendix I and related appendices from the supplied IMF content unit.*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2009/_wp09281.pdf_