Working Paper
Global Current Account Imbalances and Exchange Rate Adjustment: The Role of Oil Suppliers
The present paper extends the Obstfeld and Rogoff (2005) framework of current account
imbalances by the oil exporting countries as a fourth region. It sets the stage for
a variety of analysis that can be conducted within a four-region-setting that accounts for
the importance of OPEC as a major current account surplus provider in the process of
narrowing global current account imbalances. We find that including the oil exporting
countries as an additional region consisting of OPEC and Russia lowers the adjustment
effects predicted by Obstfeld and Rogoff. Depending on different assumptions on how
global imbalances might be eliminated, our model predicts a real dollar depreciation in
the range of 29.9 to 52.6 percent.