Optimal exchange rate policy for a small oil-exporting country: A dynamic general equilibrium perspective

Almukhtar Saif Al-Abri*

*المؤلف المقابل لهذا العمل

نتاج البحث: المساهمة في مجلةArticleمراجعة النظراء

6 اقتباسات (Scopus)

ملخص

This paper examines the choice of optimal exchange rate regime for an oil-exporting small open economy using a welfare-based model. The paper extends the standard New Keynesian Small Open Economy model to include three countries: a small oil-exporting country and two large foreign countries. The model also features three sectors: traded, non-traded, and primary-commodity (crude-oil). The sources of uncertainty are random monetary (demand), productivity (real), and real oil price (supply) shocks. Despite the absence of a non-oil traded sector in this primary-commodity economy, the welfare analysis suggests that flexible exchange rate regimes can reduce external shocks and consumption volatility given certain caveats about pricing-schemes. The analysis also suggests that a basket peg is more welfare-improving than a unilateral peg, as higher volatility of the anchor currency reduces consumer welfare.

اللغة الأصليةEnglish
الصفحات (من إلى)88-98
عدد الصفحات11
دوريةEconomic Modelling
مستوى الصوت36
المعرِّفات الرقمية للأشياء
حالة النشرPublished - يناير 2014

ASJC Scopus subject areas

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