01674cas a2200241 a 4500 AALejournalIMF010161 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451929454 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. The Effects of Currency Substitutionon the Response of the Current Account to Supply Shocks. Washington, D.C. : International Monetary Fund, 1988. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Standard real models predict that a permanent increase in oil prices would result in a current account surplus. This is due to the fact that investment falls while saving remains unchanged. This paper shows that if currency substitution is introduced into the analysis, the same shock could cause a current account deficit. Furthermore, the higher the dependence of the economy on oil, the larger would be the deficit. The presence of foreign money makes it optimal for the public to decrease saving following the terms of trade deterioration. The fall in saving could be larger than the decline in investment. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1988/005 Full text available on IMF http://elibrary.imf.org/view/journals/001/1988/005/001.1988.issue-005-en.xml IMF e-Library