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The US Dollar, Oil Prices and the US Current Account

  • Author / Creator
    Abdel Razek, Noha
  • The thesis examines how oil prices and asset stocks affect the US dollar. It also examines the role of different factors postulated in the literature to have caused recent US current account imbalances. In the first two chapters, I study the role of oil prices and the US government debt in determining US dollar movements. In Chapter One, I apply a theoretical portfolio balance model. In Chapter Two, I apply an empirical Error Correction Model. Chapter Two shows that the government debt and oil prices are significant short- and long-run determinants of US dollar movements. The findings of Chapter Two, that increases in the oil price and US government debt cause the US dollar to depreciate, are consistent with the predictions of Chapter One. The negative impact of an oil price increase on the US dollar is consistent, according to the portfolio balance models in Chapter One and in Krugman (1980), with a situation in which oil exporters tend to prefer non-US goods and assets. In Chapter Three, I find, using a Vector Autoregressive model, that the increase in the US government debt did not contribute to the widening of the US current account deficit. Also, in line with Killian et al. (2007), but in contrast to the “global savings glut” view, an oil-price increase improves the US current account balance. This occurs chiefly because a rise in the price of oil reduces US wealth, measured as the Standard and Poor equity index, which promotes US savings. China’s increasing role in the world economy affects the US current account indirectly through the real oil price and the US government debt.

  • Subjects / Keywords
  • Graduation date
    2012-09
  • Type of Item
    Thesis
  • Degree
    Doctor of Philosophy
  • DOI
    https://doi.org/10.7939/R3JM1D
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
  • Language
    English
  • Institution
    University of Alberta
  • Degree level
    Doctoral
  • Department
    • Department of Economics
  • Supervisor / co-supervisor and their department(s)
    • Supervisor: Prof. Smith, Constance (Department of Economics), Co-supervisor: Prof. Landon, Stuart (Department of Economics)
  • Examining committee members and their departments
    • Prof. Plourde, Andre (Department of Economics, University of Alberta), Prof. Smith, Todd (Department of Economics, University of Alberta), Prof. Scholnick, Barry (Department of Business, University of Alberta), Prof. Iscan, Talan (Department of Economics, Dalhousie University)