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Commodity Price Shocks and Fiscal Outcomes

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  • Issouf Samaké
  • Nicola Spatafora

Abstract

The experience of developing countries over 1990-2010 indicates that commodity prices have a significant impact on fiscal outcomes. Both revenue and expenditure rise in response to commodity (import or export) price increases; the response of the fiscal deficit is ambiguous. A floating exchange rate regime only partially offsets the impact; foreign-exchange reserves do not dampen the effects. Hence, there is a strong case for fiscal hedging against commodity price shocks. Hedging instruments based on a limited set of benchmark world prices for a narrow set of commodities may suffice to realize most of the potential benefits.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/112.

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Length: 48
Date of creation: 01 May 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/112

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Related research

Keywords: Commodity prices; Exchange rate regimes; External shocks; Floating exchange rates; Low-income developing countries; export prices; commodity export; commodity exporters; exporters; import prices; exchange rate regime; commodity exports; export price; fuel exporters; import price; trade taxes; export revenue; commodity trade; export volumes; export price index; domestic prices; export taxes; world price; international markets; value of exports; total exports; export restrictions; world prices; exporting countries; exporter; increased export; agricultural trade; international trade; trade shocks; price fluctuations; world markets; export commodities; dynamic effects; world ? prices; exchange rate movements; monetary integration; market segmentation; agricultural commodities; terms of trade shocks; oil-producing countries; commodity exporter; export income; commodity-exporting countries; global trading; capital flows; market trends; terms of trade;

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  1. Graciela L. Kaminsky, 2010. "Terms of Trade Shocks and Fiscal Cycles," NBER Working Papers 15780, National Bureau of Economic Research, Inc.
  2. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  3. Martin, Will & Anderson, Kym, 2011. "Export restrictions and price insulation during commodity price booms," Policy Research Working Paper Series 5645, The World Bank.
  4. Olivier Jeanne & Damiano Sandri & Eduardo Borensztein, 2010. "Macro-Hedging for Commodity Exporters," 2010 Meeting Papers 832, Society for Economic Dynamics.
  5. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  6. Leandro Medina, 2010. "The Dynamic Effects of Commodity Priceson Fiscal Performance in Latin America," IMF Working Papers 10/192, International Monetary Fund.
  7. Minot, Nicholas, 2010. "Transmission of World Food Price Changes to African Markets and its Effect on Household Welfare," Food Security Collaborative Working Papers 58563, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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