The monetary approach to the balance of payments: The case of the oil-based, small, open, developing economies of Libya, Kuwait and Saudi Arabia

Thesis/Dissertation · Fri Jan 01 04:00:00 EST 1988

OSTI ID:5237493

Buzakuk, M R

This study explores the determinants of foreign reserves flow in light of the oil-based small open economies of Libya, Kuwait, and Saudi Arabia. The period of study encompasses the major oil price increases of the 1970s and early 1980s, which had led to the huge transfers of foreign exchanges towards these, among other, developing economies. The framework of analysis is basically a monetary approach to the balance of payments. This study is of both a theoretical and empirical nature. It utilizes the monetary forces in the domestic money market to derive a basic balance of payments (BOP) equation that explains the monetary nature of the balance of payments. The study found that the data from those countries support the monetary relationships as hypothesized by the monetary approach, especially the negative one-to-one relation between domestic credit (DC) and the BOP. Results from the simultaneous estimations of the BOP and DC reported better estimates than the single-equation model. Findings from the reaction function indicated that the monetary authorities of these oil-based economies were actively sterilizing the effect of foreign reserve flows. Findings supported the integrated market hypothesis in Kuwait and Libya, but not in the Saudi case.

• Research Organization: Oklahoma Univ., Norman, OK (USA)
• OSTI ID: 5237493
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002 -- Energy Planning & Policy-- Petroleum
AFRICA
ASIA
CARTELS
DEVELOPING COUNTRIES
ECONOMIC ANALYSIS
ECONOMICS
EMBARGOES
INDUSTRY
KUWAIT
LIBYA
MIDDLE EAST
PETROLEUM INDUSTRY
SAUDI ARABIA
TRADE