Working Paper: NBER ID: w16052
Authors: John D. Burger; Alessandro Rebucci; Francis E. Warnock; Veronica Cacdac Warnock
Abstract: We assess the extent to which a country's external capital structure can aid in mitigating the macroeconomic impact of oil price shocks. We study two Caribbean economies highly vulnerable to oil price shocks, 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. We find that both countries could alter their international portfolio to provide a more effective buffer against such shocks.
Keywords: External capital structure; Oil price shocks; Macroeconomic impact; Jamaica; Trinidad and Tobago
JEL Codes: F3; G10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Jamaica's currency mismatch (F31) | vulnerability to oil price shocks (Q43) |
| Trinidad and Tobago's capital structure (F32) | resilience to oil price shocks (Q43) |
| Jamaica's external capital structure modifications (F32) | better mitigation of oil price shocks (Q47) |
| Trinidad and Tobago's exposure to foreign assets (F65) | better shielding against oil price shocks (Q47) |
| Oil price shocks (Q43) | Jamaica's external accounts (F32) |
| Oil price shocks (Q43) | Trinidad and Tobago's external accounts (F32) |