An Analysis Of The Impact Of Oil Dollar On US Balance Of Payments

Since the birth of petro-dollars in 1970 s, the problem of global economic imbalances became increasingly apparent. The large current account deficit of the United States is an important performance of global economic imbalances. The current account deficit expanded since the launch of petro-dollars. In theory, petrodollars are part of the US current account deficit, which is associated with the pricing mechanism of petro-dollars. But there is still lack of more detailed analysis on the influence of petro-dollars on current account and capital and financial account.This paper studies the logic relations between petrodollars and the balance of payments of U.S., and detailed analyzes the source of petrodollars and the principles of the influence of petro-dollars on current account and capital and financial account. This paper found that the relationship between the pricing mechanism of petro-dollars and the US current account deficit. Besides, this paper also found that the recycling of petrodollars through the US current account can remedy the part of the US current account deficit, and the recycling of petro-dollars through the US capital and financial account can also remedy the part of the US current account deficit.This paper analyzes the relationship between petro-dollars and the imbalances of the U.S. balance of payments by empirical analysis. Through granger test, we know that petrodollar can guide America’s current-account deficit. The part of petro-dollar recycling is one of the reasons for America’s capital and financial account surplus, and the recycled petro-dollar is mainly invested in U.S. securities. However, data indicates that since 2000, the quantity of petro-dollars back into the United States has a tendency of decline. With the development of the global financial market, the investment way of oil exporters apply petro-dollars diversified and the mainly investment regions of the oil exporting countries are also gradually changed. So the petro-dollars returning to the United States gradually declined. This will weaken the role of petro-dollars recycling in easing U.S. balance of payments disequilibrium, the world economic rebalance was affected as well.