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We would like to thank Ali Alichi, Rudolf Bems, Tim Callen, Irineu de Carvalho Filho, Enrica Detragiache, Aasim Husain, Mohsin Khan, Leslie Lipschitz, Paulo Mauro, Gian Maria Milesi-Ferretti, Marc Quintyn, Abdelhak Senhadji, and participants at an IMF Institute Seminar for helpful comments and discussions. All remaining errors are our own.
Oil/gas exporting countries are Algeria, Angola, Azerbaijan, Bahrain, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Kazakhstan, Kuwait, Libya, Nigeria, Norway, Oman, Qatar, Russia, Saudi Arabia, Syria, Turkmenistan, United Arab Emirates, Venezuela, and Yemen.
Emerging Asia comprises China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan Province of China, Thailand, and Vietnam.
Most previous studies either exclude oil exporters or use an oil exporter dummy. Arezki (2007) and Hasanov and Senhadji (2008) examine current account determinants for the Middle East and Central Asian oil exporters. IMF (2008b) has a short discussion of current account determinants for a larger set of oil-exporting countries.
Greenspan (2005a, b) and Ferguson (2004), among others, claim that fiscal policy plays a relatively minor role in determining current account. Corsetti and Muller (2006) show that the US fiscal policy had a limited impact on the country’s current account.
Higgins (1998) provides empirical evidence on the relevance of demographic differences in driving international capital movements.
Turkmenistan and Yemen drop out from the estimated sample due to missing observations.
The bias is in the order of 1/T.
We use a one-step estimator with robust standard errors.
We exclude potential outliers from the estimation sample although results hold using the total sample (Appendix III, Table A1). To account for the presence of outliers, observations with excessively high leverage were excluded from the sample. More precisely, all observations with DFBETAi,j statistic (with i indicating a country and j a time period) above a certain absolute threshold were dropped. We use a more conservative cutoff value than suggested in the literature—
In a one-lag dynamic model, a long-term coefficient equals a short-term coefficient (the coefficient associated with a variable of interest) divided by one minus a coefficient associated with the lagged dependent variable.
In the following subsection, we address a potential identification issue that could arise when using fiscal balance as a proxy for fiscal policy given the importance of oil revenues in total revenues. We estimate separately the impact of spending and revenues and find that the coefficient associated with spending is both statistically and economically significant (-0.77) and is much larger than that for the global sample (-0.11).
The half-life is computed as log(0.5)/log(α) where α is the coefficient estimate on the lagged dependent variable.
Calderon, Chong, and Zanforlin (2007) find a similar result for African countries, most of which are commodity exporters.
However, domestic spending directed toward tradable goods and existing supply bottlenecks are likely to ease inflationary pressures. Expenditures that promote long-term growth and economic diversification may mitigate Dutch disease concerns as well.
Billmeier and Hakura (2008) find that the impact of the REER on the trade balance is small using a sample of oil-exporting countries in the Middle East and Central Asia region.
Real exchange rate appreciation in oil-exporting countries would also imply potentially large adverse balance sheet effects given large external asset positions of some oil-exporting countries.