whereas it results in a 0.02 percentage point deterioration in current account balances of oil (natural gas) importers. The results suggest that due to substitution between commodities, positive coal price shocks may be leading oil and natural gas exporters to export more of their commodity (thus resulting in an improvement of their current account balances).

As shown in the Online Appendix, results from the robustness checks based on the inclusion of real exchange rates are highly consistent with the results of the benchmark model.

**Relative contribution of alternative real energy price shocks to current account balances.** The contributions of oil, natural gas, and coal price shocks to the variance of current account balances of alternative country groups are given in Figure 10. The main observation is that oil price shocks contribute the most among energy price shocks; this contribution is higher for oil exporters (versus importers), countries with smaller service sectors, and with relatively less open capital accounts. The contribution of natural gas price shocks is higher for energy importers relative to exporters, countries with historical current account deficits, and relatively more capital-open countries. Finally, the contribution of coal price shocks is higher for energy exporters relative to importers, countries with historical current account surpluses, smaller service sectors, and relatively less open capital accounts.

Overall, these results imply that alternative energy price shocks have quite different effects on and contributions to the variance of current account balances of countries. As shown in the Online Appendix, robustness checks based on alternative ordering of variables or inclusion of real exchange rates highly support the results of the benchmark model. However, certain results are slightly different when countryspecific real exchange rates are included, which can partly be due to the smaller sample size because of limited data on country-specific real exchange rates.

# **4.3. Oil demand versus oil supply shocks and current account balances**

As described in Section 3.3, there is overwhelming evidence in the literature that the effect of oil price shocks on macroeconomic aggregates depends on the source of the shocks. This subsection discusses the responses of current account balances to oil demand versus oil supply shocks.

# **4.3.1. Role of oil demand shocks in current account balances**

**Impact of oil demand shocks on current account balances.** A positive oil demand shock (normalized such that it results in a 1 percent increase in real oil prices) results in a current account surplus in oil exporters, whereas it results in a current account deficit in oil importers (Figure 11). This result is consistent with country-specific studies of oil exporters and oil importers (for example, Le and Chang, 2013; Balli et al., 2021). The corresponding magnitudes suggest that a positive oil demand shock improves the current account balances of oil exporters by 0.11 percentage points while it results in a 0.09 percentage point deterioration in the balances of oil importers. The same shock improves (deteriorates) current account balances of natural gas exporters by 0.21 (0.07) percentage points, whereas it improves (deteriorates) current account balances of countries with historical current account surpluses (deficits) by 0.07 (0.08) percentage points. As shown in the Online Appendix, robustness checks based on additional elasticity restrictions or inclusion of real exchange rates highly support results of the benchmark model.

**Relative contribution of oil demand shocks to current account balances.** Real oil price shocks explain between 15 and 17 percent of the variance of current account balances (Figure 12). The interquartile

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