Abstract

The devaluation of a currency often triggers complex dynamics in a country’s export sector especially when exports are denominated in foreign currency but production costs are local. This study examines the effects of a hypothetical or observed devaluation of the Saudi Riyal on Saudi Arabia’s oil exports through the lens of the J-Curve hypothesis. According to the J-Curve phenomenon currency devaluation may initially worsen a trade balance due to existing contracts and price rigidities but subsequently improve it as export volumes adjust and become more competitive in foreign markets. This research investigates whether the devaluation of the Saudi Riyal would (or has) led to significant changes in oil export revenues and volumes over time. The analysis also considers the role of global oil price volatility production and export quotas contractual obligations and international demand elasticity. Using time-series data on oil export volumes revenues (in USD) exchange rates and global oil