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Today versus Tomorrow - The Sensitivity of the Non-Oil Current Account Balance to Permanent and Current Income
Author:
Mr. Alun H. Thomas
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and
Mr. Tamim Bayoumi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 248
Language:
English
Publication Date:
01 Nov 2009
DOI:
https://doi.org/10.5089/9781451873955.001
ISBN:
9781451873955
ISSN:
1018-5941
Pages:
17
Keywords:
WP; trade balance
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund