Current Account and Precautionary Savings for Exporters of Exhaustible Resources

40 Pages Posted: 18 Mar 2009

See all articles by Rudolfs Bems

Rudolfs Bems

International Monetary Fund (IMF); European Central Bank (ECB)

Irineu de Carvalho Filho

International Monetary Fund (IMF)

Date Written: March 2009

Abstract

Exporters of exhaustible resources have historically exhibited higher income volatility than other economies, suggesting a heightened role for precautionary savings. This paper uses a parameterized small open economy model to quantify the role of precautionary savings in economies with exhaustible resources, when the only source of uncertainty is the price of the exhaustible resource. Results show that the precautionary motive can generate sizable external sector savings. When aggregated over the sample countries, precautionary savings in 2006 add up to 3.2 percent of GDP. The quantitative importance of the precautionary motive varies considerably across the sample countries and is driven primarily by the weight of exhaustible resource revenues in future income. The parameterized model fares well at capturing current account balances in both cross-section and time-series data.

Keywords: Working Papers

Suggested Citation

Bems, Rudolfs and de Carvalho Filho, Irineu, Current Account and Precautionary Savings for Exporters of Exhaustible Resources (March 2009). IMF Working Paper No. 09/33, Available at SSRN: https://ssrn.com/abstract=1361375

Rudolfs Bems (Contact Author)

International Monetary Fund (IMF) ( email )

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United States

European Central Bank (ECB) ( email )

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Frankfurt am Main, 60314
Germany

Irineu De Carvalho Filho

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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