Equilibrium Non-Oil Current Account Assessments for Oil Producing Countries
IMF Working Papers, August 1, 2008
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Bibliographic details
- Authors: Alun H. Thomas, Jun I Kim, Aqib Aslam
- Published: August 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870565.001
Summary of purpose and scope
- Introduces a methodology for assessing external balance in countries with large stocks of non-renewable resources based on oil stock data.
- Applies the methodology to selected oil producing countries.
- Uses a stock approach (instead of the more traditional flow approach) to estimate the equilibrium non-oil current account consistent with optimal consumption smoothing.
Methodology
- Stock approach: uses oil stock data and geological data for oil reserves to estimate oil wealth and the equilibrium non-oil current account.
- Conceptual basis: consistent with optimal consumption smoothing and present discounted value/cash flow concepts.
- Key methodological distinction: replaces or complements flow-based approaches by focusing on wealth implied by oil stocks.
Main findings and results
- Based on an oil price about US$70 per barrel prevailing in the summer of 2007:
- Baseline estimates indicate that the non-oil current accounts for most of the countries in the sample are broadly in equilibrium.
- Using oil price projections as of the summer of 2008:
- Implies large disparities between the equilibrium non-oil current account position and the medium term forecast for all countries in the sample except for Malaysia.
Sensitivities and caveats
- The estimated non-oil current account norm is very sensitive to oil price projections.
- Benefit of the stock approach: ability to use geological data for oil reserves to estimate oil wealth.
- Caveat: sensitivity to oil price projections can produce markedly different equilibrium assessments depending on the price scenario used.
Publication and metadata
- Authors: Alun H. Thomas, Jun I Kim, Aqib Aslam
- Date: August 1, 2008
- Series: Working Paper No. 2008/198
- Issue: 198
- Volume: 2008
- Pages: 24
- DOI: https://doi.org/10.5089/9781451870565.001
- Stock No: WPIEA2008198
- ISBN: 9781451870565
- ISSN: 1018-5941
- Subjects: Consumption, Current account, Oil, Oil prices, Oil production
- Keywords: cash flow, present discounted value, WP
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