Today versus Tomorrow - The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income

Author/Editor:

Alun H. Thomas ; Tamim Bayoumi

Publication Date:

November 1, 2009

Electronic Access:

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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:

This paper applies the Permanent Income Model to the non-oil current accounts of the major oil exporters to assess the extent to which national consumption decisions in these countries are made on the basis of permanent versus current income. A test of whether the return on oil wealth and oil balance coefficients sum to unity is accepted for all specifications that adjust the return on wealth for future population changes. For oil-exporting countries outside Africa, around half of the fluctuations in the private sector non-oil balance are driven by considerations of changes in permanent income (the return on oil wealth) rather than current income. By contrast, for the public sector and African countries permanent income has little or no effect.

Series:

Working Paper No. 09/248

Subject:

English

Publication Date:

November 1, 2009

ISBN/ISSN:

9781451873955/1018-5941

Stock No:

WPIEA2009248

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

17

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