External%20Capital%20Structures%20and%20Oil%20Price%20Volatility

Working Papers

External Capital Structures and Oil Price Volatility


CODE: IDB-WP-107
AUTHOR(s): Burger, John D. , Cacdac Warnock, Veronica , Rebucci, Alessandro , Warnock, Francis E.
PUBLISHED: May 2010
LANGUAGE: English
RELATED TOPICS: Macroeconomics
DOWNLOAD FILE IN: English

Abstract:

This paper assesses the extent to which a country’s external capital structure can aid in mitigating the macroeconomic impact of oil price shocks. Two Caribbean economies highly vulnerable to oil price shocks are considered: an oil importer (Jamaica) and an oil exporter (Trinidad and Tobago). From a risk-sharing perspective, a desirable external capital structure is one that, through international capital gains and losses, helps offset responses of the current account balance to external shocks. It is found that both countries could alter their international portfolio to provide a better buffer against such shocks.

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