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Fiscal Policy, the Real Exchange Rate and Commodity Prices

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  • Carmen Reinhart

Abstract

The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 90/91.

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Length: 20
Date of creation: 01 Oct 1990
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Handle: RePEc:imf:imfwpa:90/91

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  1. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-61, December.
  2. Guidotti, Pablo E. & Vegh, Carlos A., 1992. "Macroeconomic interdependence under capital controls : A two-country model of dual exchange rates," Journal of International Economics, Elsevier, vol. 32(3-4), pages 353-367, May.
  3. Nicola Rossi, 1988. "Government Spending, the Real Interest Rate, and the Behavior of Liquidity-Constrained Consumers in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 104-140, March.
  4. Giovannini, Alberto, 1988. "The real exchange rate, the capital stock, and fiscal policy," European Economic Review, Elsevier, vol. 32(9), pages 1747-1767, November.
  5. Lloyd A. Metzler, 1949. "Tariffs, the Terms of Trade, and the Distribution of National Income," Journal of Political Economy, University of Chicago Press, vol. 57, pages 1.
  6. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  7. Paul R. Krugman, 1980. "Oil and the Dollar," NBER Working Papers 0554, National Bureau of Economic Research, Inc.
  8. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
  9. Reinhart, Carmen, 1988. "Commodity markets and the international transmission of fiscal shocks," MPRA Paper 13411, University Library of Munich, Germany.
  10. Gilbert, Christopher L, 1989. "The Impact of Exchange Rates and Developing Country Debt on Commodity Prices," Economic Journal, Royal Economic Society, vol. 99(397), pages 773-84, September.
  11. Ronald E. Findlay & Carlos Alfredo Rodriguez, 1977. "Intermediate Imports and Macroeconomic Policy under Flexible Exchange Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 208-17, May.
  12. Haque, Nadeem U & Montiel, Peter, 1989. "Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 408-15, August.
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Cited by:
  1. Luis Eduardo Arango & Fernando Arias & Luz Adriana Flórez, 2008. "Trends, Fluctuations, and Determinants of Commodity Prices," BORRADORES DE ECONOMIA 004734, BANCO DE LA REPÚBLICA.
  2. Reinhart, Carmen, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," MPRA Paper 6974, University Library of Munich, Germany.
  3. Baffes, John & Dennis, Allen, 2013. "Long-term drivers of food prices," Policy Research Working Paper Series 6455, The World Bank.
  4. Reinhart, Carmen, 1994. "Devaluation, Relative Prices, and International Trade," MPRA Paper 13708, University Library of Munich, Germany.
  5. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Working Papers 03-24, Bank of Canada.
  6. Luis Eduardo Arango & Ximena Chavarro & Eliana Rocío González, 2012. "Precios de bienes primarios e inflación en Colombia," Borradores de Economia 712, Banco de la Republica de Colombia.
  7. Hong Liang & John T. Cuddington, 2000. "Will the Emergence of the Euro Affect World Commodity Prices?," IMF Working Papers 00/208, International Monetary Fund.
  8. Reinhart, Carmen & Borensztein, Eduardo, 1994. "The determinants of commodity prices," MPRA Paper 13870, University Library of Munich, Germany.

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