Table of Contents

ABSTRACT

The oil price shocks are the major source of variation to macroeconomic indicators of the economy. However, nature of economy whether importing or exporting this valuable resource further exacerbates the interacting variables. Further, the policy stance of the economy is main indicator accelerating or decelerating the nexus of resource price to balances. For this purpose this study has examined the individual and interaction effects of financial and trade liberalization on the current account balance of OPEC economies. The study used a fixed effect panel estimators approach by categorizing the trade and financial openness indicators for the period of 1990- 2021. The findings suggest that financial and trade liberalization both decelerate the process of adjustment in current accounts. The conclusion implies that the interaction effects of both moderators are critical for deteriorating the current account imbalances due to oil price shocks. The interaction effects are negative that imply to consider the complementary nature of oil price shock and financial integration/ trade liberalization while, handling the current accounts of the oil exporting economies. The complementary effects further convey that while discussion of the adjustment to current accounts the trade openness/financial integration effects also needs attention for craving the policy relayed to oil shocks.

Keywords: trade liberalization, OPEC economies, Interaction effect, moderators

JEL Classification Code: F13, F39, F41