Oil Shocks and External Balances

By Lutz Kilian, Alessandro Rebucci, Nicola Spatafora. Social Science Research Network, 2009

370 citations recorded by the source corpus.

We provide estimates of the effects of demand and supply shocks in the global crude oil market on several measures of oil exporters' and oil importers' external balances, including the oil trade balance, the non-oil trade balance, the current account, capital gains, and changes in net foreign assets (NFA). First, we show that the effect of oil demand and supply shocks on the merchandise trade balance and the current account, which depending on the source of the shock can be large, depends critically on the response of the non-oil trade balance. Our results provide evidence of an intermediate degree of international financial integration. Second, we document the presence of large and systematic valuation effects in response to these shocks. Valuation effects overall tend to cushion the effect of oil demand and supply shocks on the NFA positions of oil exporters and oil importers. Third, we quantify the overall importance of global business cycle demand shocks as well as oil-market specific demand and supply shocks for external balances.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/df14440cc806dab19e86e228f7726e89c5083ed8

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Citations in the corpus

The impact of oil shocks on exchange rates: A Markov-switching approach (2016, background): “The basic theoretical framework of this channel is developed by Golub (1983) and Krugman (1983), whereas the related empirical evidence can be found in Bénassy-Quéré et al. (2007), Kilian et al. (2009), and Bodenstein et al. (2011).”
Global Exchange Rate Configurations: Do Oil Shocks Matter? (2016, neutral): “It is interesting to analyze the implications of our results for the debate over the adjustment of global imbalances, relating them to those of a previous study by Kilian, Rebucci, and Spatafora (2009).”
The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses (2015, neutral): “Oil-importing countries’ current accounts could also see substantial improvements (Kilian, Rebucci, and Spatafora 2009) but the impact might vary depending on the underlying drivers of oil price developments (IMF 2005; Buetzer et al. 2012).”
The Structural Manifestation of the 'Dutch Disease’: The Case of Oil Exporting Countries (2010, background): “From equation (11) and equation (12), the Dutch disease still holds as the tradable sector sheds labor and capital in proportion to its factor intensity, which is then absorbed by the non-tradable sector at its own factor intensity.”
Asymmetries in the response of economic activity to oil price increases and decreases (2015, background): “[38] Kilian, Lutz, Alessandro Rebucci and Nikola Spatafora (2009), “Oil Shocks and External Balances,” Journal of International Economics, 77(2), 181-194 [39] Koop, Gary, M.”
Forecasting the Price of Oil (2010, neutral): “31 In related work, Ramey and Vine (2010) propose an alternative adjustment to the price of gasoline that reflects the time cost of queuing in gasoline markets during the 1970s.”
Oil Shocks and External Adjustment (2007, methodology): “2In a recent working paper Kilian, Rebucci, and Spatafora (2007) used a structural VAR to analyze the reaction of the oil and nonoil trade balance to both oil supply and demand shocks.”
Bayesian Mixed Frequency VARs (2015, background): “A number of papers such as Kilian and Park (2009) or Kilian et al. (2009), to name a few, estimate monthly VARs in order to study the affects of oil shocks, even though the spot oil price changes much more frequently.”
Explaining Fluctuations in Gasoline Prices: A Joint Model of the Global Crude Oil Market and the U.S. Retail Gasoline Market (2010, methodology): “The idea of using fluctuations in dry cargo freight rates as indicators of shifts in the global real activity dates back to Isserlis (1938) and Tinbergen (1959; also see Stopford (1997) and Klovland (2004). The panel of monthly freight-rate data underlying the global real activity index was collecte”
The Implications of Natural Resource Exports for Nonresource Trade (2016, neutral): “Kilian et al. (2009) investigate the effects of different types of oil price shocks on the external balances of oil exporters as a group and oil-importers as a group.”
HOW DOES STOCK MARKET VOLATILITY REACT TO OIL PRICE SHOCKS? (2017, positive): “Moreover, these findings are not confined to the United States, rather they hold also in international comparisons [see, e.g., Kilian et al. (2009), Baumeister et al. (2010), Jung and Park (2011), Abhyankar et al. (2013), Kang and Ratti (2013a), Degiannakis et al. (2014), Güntner (2014)].”