Current Issues in Economics and Finance

Recycling Petrodollars

December 2006Volume 12, Number 9
JEL classification: F32, F34, F21, F41

Authors: Matthew Higgins, Thomas Klitgaard, and Robert Lerman

In recent years, oil-exporting countries have experienced windfall gains with the rise in the price of oil. A look at how oil exporters “recycle” their revenues reveals that roughly half of the petrodollar windfall has gone to purchase foreign goods, especially from Europe and China, while the remainder has been invested in foreign assets. Although it is difficult to determine where the funds are first invested, the evidence suggests that the bulk are ending up, directly or indirectly, in the UnitedStates.

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