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Commodity Price Shocks and the Odds on Fiscal Performance: A Structural Vector Autoregression Approach

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  • Francis Y Kumah
  • John M Matovu

Abstract

Unanticipated changes in commodity prices can generate significant movements in fiscal aggregates. This paper seeks to understand the dynamics of these fiscal movements in the context of transitory commodity price shocks, using sample data from four countries of the Commonwealth of Independent States—two oil-exporting and two non-oil-exporting commodity-intensive countries. It adopts a structural vector autoregression approach to identify dynamic effects of commodity price shocks on fiscal performance under two broad tax regimes. Stochastic simulations indicate high probabilities of fiscal overperformance in the short term when commodity prices are high. These probabilities deteriorate significantly, however, in the long run after the transitory positive commodity price shock has dissipated, particularly when lax fiscal policy is adopted during the period of the price boom. IMF Staff Papers (2007) 54, 91–112. doi:10.1057/palgrave.imfsp.9450001

Suggested Citation

  • Francis Y Kumah & John M Matovu, 2007. "Commodity Price Shocks and the Odds on Fiscal Performance: A Structural Vector Autoregression Approach," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 91-112, May.
    • Handle: RePEc:pal:imfstp:v:54:y:2007:i:1:p:91-112
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    Citations

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    Cited by:

    1. Samuel Guérineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," Working Papers halshs-00659098, HAL.
    2. Samuel GUERINEAU & Hélène EHRHART, 2011. "Commodity price volatility and Tax revenues: Evidence from developing countries," Working Papers 201131, CERDI.
    3. Monoj Kumar Majumder & Mala Raghavan & Joaquin Vespignani, 2022. "The impact of commodity price volatility on fiscal balance and the role of real interest rate," Empirical Economics, Springer, vol. 63(3), pages 1375-1402, September.
    4. Samuel Guérineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," Working Papers halshs-00659100, HAL.
    5. Dakpoulé Da & Mahamadou Diarra, 2023. "Effect of International Commodity Price Shocks on Public Finances in Africa," Public Finance Review, , vol. 51(2), pages 236-261, March.
    6. Hélène Ehrhart & Samuel Guérineau, 2012. "Commodity price volatility and Tax revenues: Evidence from developing countries," Working Papers halshs-00658210, HAL.
    7. Samuel Guérineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," CERDI Working papers halshs-00659098, HAL.
    8. 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.
    9. Monoj Kumar Majumder & Mala Raghavan & Joaquin Vespignani, 2020. "Commodity price volatility, fiscal balance and real interest rate," CAMA Working Papers 2020-79, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    10. Hélène Ehrhart & Samuel Guérineau, 2012. "Commodity price volatility and Tax revenues: Evidence from developing countries," CERDI Working papers halshs-00658210, HAL.
    11. Samuel Guérineau & Hélène Ehrhart, 2012. "The impact of high and volatile commodity prices on public finances: Evidence from developing countries," CERDI Working papers halshs-00659100, HAL.

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