The Balance of Payments of Oil Importing Countries: An Aggregate Econometric Analysis

Using annual data drawn from 1963-1983 we estimate an econometric model of the balance of payments of oil-importing LDCs. The model consists of equations for the quantities of exports and imports, unit value indices for exports and imports, capital flows, reserves and the exchange rate. An important feature of the model is the way in which shortages of foreign exchange affect imports, external borrowing and the exchange rate. A number of simulation exercises are carried out to determine the model's properties.