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The Effects of Commodity Price Shocks on Fiscal Aggregates in Latin America

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  • Leandro Medina

    (IMF’s African Department)

Abstract

This paper analyzes the effects of commodity price shocks on fiscal revenues and expenditures in Latin American countries quarterly from 1995 to 2013. The results indicate that Latin American countries’ fiscal aggregates rise in response to positive shocks to commodity prices, yet there are marked differences across countries. Fiscal variables in Venezuela display the highest sensitivity to commodity price shocks, with expenditures responding significantly more than revenues. At the other end of the spectrum, in Chile expenditures respond very little to commodity price fluctuations and the dynamic responses of its fiscal indicators are very similar to those seen in high-income commodity-exporting countries. The results suggest that this heterogeneity may relate to the enactment of fiscal rules, as dynamic panel estimations show that government expenditures in countries with fiscal rules respond less to shocks to commodity prices.

Suggested Citation

  • Leandro Medina, 2016. "The Effects of Commodity Price Shocks on Fiscal Aggregates in Latin America," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 502-525, August.
    • Handle: RePEc:pal:imfecr:v:64:y:2016:i:3:d:10.1057_imfer.2016.14
    DOI: 10.1057/imfer.2016.14
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    Cited by:

    1. Victor Pontines & Davaajargal Luvsannyam, 2023. "External Commodity Shocks and the Insulating Role of Fiscal Policy on Real Output: Evidence from a Commodity-Exporting Economy," Working Papers wp51, South East Asian Central Banks (SEACEN) Research and Training Centre.
    2. Ardanaz, Martín & Izquierdo, Alejandro, 2017. "Current Expenditure Upswings in Good Times and Capital Expenditure Downswings in Bad Times?: New Evidence from Developing Countries," IDB Publications (Working Papers) 8558, Inter-American Development Bank.
    3. Dante A. Urbina & Gabriel Rodríguez, 2023. "Evolution of the effects of mineral commodity prices on fiscal fluctuations: empirical evidence from TVP-VAR-SV models for Peru," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(1), pages 153-184, February.
    4. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    5. Ardanaz, Martín & Izquierdo, Alejandro, 2022. "Current expenditure upswings in good times and public investment downswings in bad times? New evidence from developing countries," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 118-134.

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    More about this item

    Keywords

    E62; H50; O13;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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