Exchange Rate Assessment for Oil Exporters

IMF Working Papers, April 1, 2009

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Exchange Rate Assessment for Oil Exporters

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Bibliographic details

• Authors: Klaus-Stefan Enders
• Published: April 1, 2009
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451872286.001

Summary

• The paper addresses the lack of consensus on assessing the equilibrium exchange rate of economies dominated by production of finite natural resources, such as oil economies of the Middle East.
• Key complicating factors:
  • Intertemporal aspects: the real exchange rate may affect the optimal/equitable rate of transformation of finite resource wealth into financial assets.
  • Risk considerations: relatively high volatility of commodity prices.
• The paper illustrates peculiarities of exchange rate assessment for natural resource producers using a simple two-period model that captures certain key aspects of many resource economies.

Model and Methodology

• Uses a simple two-period model to capture intertemporal trade-offs and risk features relevant for resource-exporting economies.
• Focus on how the real exchange rate interacts with the transformation of finite resource wealth into financial assets and the implications for equilibrium exchange rates.

Key Findings and Themes

• Little consensus exists on how to assess equilibrium exchange rates in resource-dominated economies.
• Intertemporal considerations and commodity price volatility are central to the assessment challenge.
• The two-period model highlights important peculiarities specific to natural resource producers that standard exchange rate assessment methods may not fully capture.

Subjects and Keywords (as listed)

• Subjects: Balance of payments, Commodities, Current account, Expenditure, Foreign exchange, Oil, Oil prices, Prices, Real exchange rates
• Keywords: Current account, current account deterioration, current account improvement, current account norm, equilibrium current account, equilibrium exchange rate, exchange rate, Global, goods price, government spending rise, Oil, oil export volume, oil exports, Oil prices, Real exchange rates, subsidized price, unsustainable budget, WP

Content in this bundle

• Exchange Rate Assessment for Oil Exporters; Klaus Enders; IMF Working Paper 09/81; April 1, 2009
  • Exchange Rate Assessment for Oil Exporters; Klaus Enders; IMF Working Paper 09/81; April 1, 2009 (Markdown version)
  • Exchange Rate Assessment for Oil Exporters; Klaus Enders; IMF Working Paper 09/81; April 1, 2009 (PDF)