Exchange Rate Fluctuations and Output in Oil-Producing Countries
Exchange Rate Fluctuations and Output in Oil-Producing Countries

Author: Mohsen Bahmani-Oskooee

Publisher: International Monetary Fund

Published: 2007-05

Total Pages: 38

ISBN-13:

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Conventional wisdom states that currency depreciation in oil-producing countries are contractionary because demand effects, limited by the prevalence of oil exports priced in dollars, are more than offset by adverse supply effects. Iran, however, has experienced a rapid increase in non-oil exports in the last decade. Against this background, the paper tests whether the conventional wisdom still applies to Iran and concludes that the emergence of the non-oil export sector has made currency depreciation expansionary. The expansionary effect is particularly evident with respect to anticipated persistent depreciation in the long-run. Notwithstanding the varying effects of exchange rate fluctuations on the demand and supply sides of the economy, managing a flexible exchange rate gradually over time towards achieving stability in the real effective exchange rate may strike the necessary balance.

Exchange Rate Assessments
Exchange Rate Assessments

Author: Mr.Irineu E. de Carvalho Filho

Publisher: International Monetary Fund

Published: 2009-12-01

Total Pages: 37

ISBN-13: 145187426X

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Are the current account fluctuations in oil-exporting countries "excessive"? How should their real exchange rate respond to the evolution of external (and domestic) fundamentals? This paper proposes methodologies tailored to the specific features of oil-exporting countries that help address these questions. Price-based methodologies (based on the time series of real effective exchange rates) identify a strong link between the real exchange rate and the terms of trade, but have relatively limited explanatory power. On the other hand, an empirical model of the current account, which fits oil exporting countries' data well, and an intertemporal model that takes into account the stock of oil reserves provide useful benchmarks for oil exporters' external balances.

The Effects of Exchange Rate Fluctuationson Output and Prices
The Effects of Exchange Rate Fluctuationson Output and Prices

Author: Ida Aghdas Mirzaie

Publisher: International Monetary Fund

Published: 2003-10-01

Total Pages: 32

ISBN-13: 1451860188

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The paper examines the effects of exchange rate fluctuations on real output and the price level in a sample of 33 developing countries. The theoretical model decomposes movements in the exchange rate into anticipated and unanticipated components. Unanticipated currency fluctuations help to determine aggregate demand through exports, imports, and the demand for domestic currency, and aggregate supply through the cost of imported intermediate goods. Anticipated exchange rate depreciation, through the supply channel, has limited effects on output growth and inflation. Unanticipated currency fluctuations appear more significant, with varying effects on output growth and price inflation across developing countries.

The Impacts of Oil Price Fluctuations on Competitiveness and Macroeconomic Activity
The Impacts of Oil Price Fluctuations on Competitiveness and Macroeconomic Activity

Author: Mukhriz Izraf Azman Aziz

Publisher:

Published: 2010

Total Pages:

ISBN-13:

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This thesis focuses on the relationships between oil prices fluctuations and trade-related variables. There are 6 chapters. The introductory chapter sets the scene while chapter 2 discusses the theory for economics of non-renewable resources. This is followed by three substantive chapters which focus on three different aspects of the thesis: the oil price-RCA relationship, the oil price-exchange rate relationship and the oil price-output growth relationship. Chapter 6 concludes the thesis. Chapter 3 quantifies the effects of oil price fluctuations on revealed comparative advantage (RCA) for 36 manufacturing commodities of 167 countries from 1990 to 2005. Using Zellner's (1962) seemingly unrelated regression (SURE) model, the chapter finds that oil price fluctuations negatively affect middle-income economies and net oil-exporting countries' RCA more than high-income economies and net oil-importing countries. Chapter 4 explores the long run effects of real oil price and real interest rate differential on real exchange rate for a monthly panel of 8 countries from 1980 to 2008. Using the mean group estimator, the chapter finds no statistically significant relationship between real oil price and real exchange rate for oil-importing and oil- exporting countries. However, when using the pooled mean group estimator, the chapter finds a positive and statistically significant impact of real oil price on real exchange rate for five net oil importing countries, implying that increase in oil price leads to real exchange rate depreciation . . Chapter 5 investigates the asymmetric effects of oil pnce shocks on real economic activities in Malaysia from 1991 to 2007. Using an unrestricted Vector Auto Regressive (V AR) method, mixed results are obtained. Evidence of a symmetric relationship between oil prices and economic activities is obtained from the impulse response function (IRFs). However, the variance decomposition analyses VAR suggest that oil prices have different impacts on economic activities when they increase than when they fall.

Yemen
Yemen

Author: Mr.Faisal Ahmed

Publisher: International Monetary Fund

Published: 2007-01-01

Total Pages: 24

ISBN-13: 1451865694

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This paper investigates the likely implications of declining oil production on Yemen's equilibrium exchange rate, and discusses policy options to ensure a smooth transition to a nonoil economy. The empirical results suggest that, as oil production and foreign exchange earnings fall, the Yemeni rial will have to adjust downward in real effective terms to keep pace with the equilibrium exchange rate. In light of strong pass-through from exchange rate depreciation to domestic inflation, this could entail a substantial depreciation in nominal terms. Given the nature of the adjustment, a floating exchange rate regime appears to be the best option, if supported by appropriate macroeconomic policies. However, given public fixation on a exchange rate stability, a softly managed float would be a better option for Yemen whereby the central bank may have to lead the market toward the equilibrium exchange rate.

Global Implications of Lower Oil Prices
Global Implications of Lower Oil Prices

Author: Mr.Aasim M. Husain

Publisher: International Monetary Fund

Published: 2015-07-14

Total Pages: 41

ISBN-13: 151357227X

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The sharp drop in oil prices is one of the most important global economic developments over the past year. The SDN finds that (i) supply factors have played a somewhat larger role than demand factors in driving the oil price drop, (ii) a substantial part of the price decline is expected to persist into the medium term, although there is large uncertainty, (iii) lower oil prices will support global growth, (iv) the sharp oil price drop could still trigger financial strains, and (v) policy responses should depend on the terms-of-trade impact, fiscal and external vulnerabilities, and domestic cyclical position.

Exchange Rate Assessments
Exchange Rate Assessments

Author: Rudolfs Bems

Publisher:

Published: 2009

Total Pages: 38

ISBN-13:

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Are the current account fluctuations in oil-exporting countries "excessive"? How should their real exchange rate respond to the evolution of external (and domestic) fundamentals? This paper proposes methodologies tailored to the specific features of oil-exporting countries that help address these questions. Price-based methodologies (based on the time series of real effective exchange rates) identify a strong link between the real exchange rate and the terms of trade, but have relatively limited explanatory power. On the other hand, an empirical model of the current account, which fits oil exporting countries' data well, and an intertemporal model that takes into account the stock of oil reserves provide useful benchmarks for oil exporters' external balances.

International Dimensions of Monetary Policy
International Dimensions of Monetary Policy

Author: Jordi Galí

Publisher: University of Chicago Press

Published: 2010-03-15

Total Pages: 663

ISBN-13: 0226278875

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United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.

Exchange Rate of the US Dollar and the J Curve
Exchange Rate of the US Dollar and the J Curve

Author: Ayoub Yousefi

Publisher:

Published: 2013

Total Pages:

ISBN-13:

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This study examines the effects of changes in the exchange rate of the US dollar on the trade balances of three oil-exporting countries, namely Iran, Venezuela and Saudi Arabia. An exchange rate pass-through model is applied to allow changes in the exchange rate of the dollar to affect prices of traded goods. Then, the impact of changes in prices on the quantities of imports and exports of these economies is estimated. The results suggest a partial exchange rate pass-through to these countries' import and export prices in terms of the US dollar. While the three countries raise the price of their primary export (namely crude oil) in response to a depreciation of the dollar, Saudi Arabia's long-run pricing strategy in securing a larger market share stands in contrast to that of the two other OPEC members. The sum of the estimated long-run price elasticities of demand for imports and exports is found to exceed unity for Iran and Venezuela, but less than unity for Saudi Arabia.