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Policy towards Commodity Shocks in Developing Countries

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  • Jan Gunning
  • Paul Collier

Abstract

On the basis of a comparative study of 23 episodes involving commodity price shocks we find that both the public and private sectors typically save around half of a windfall gain resulting from a price rise. We argue that private windfalls should be left with the private sector rather than taxed. The focus of policy towards windfalls should be monetary rather than fiscal. The central bank should accommodate aggregate changes in the demand for financial assets. The private sector will initially wish to increase its claims on the central bank as it saves the windfall, but will then reduce them as portfolios are switched into real assets.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 96/84.

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Length: 22
Date of creation: 01 Aug 1996
Date of revision:
Handle: RePEc:imf:imfwpa:96/84

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Cited by:
  1. Souleymane DIARRA, 2012. "Effets des Chocs de Produits de Base sur la Mobilisation des Recettes Publiques dans les Pays d'Afrique Sub-saharienne," Working Papers halshs-00658482, HAL.
  2. Tornell, Aaron, 1999. "Voracity and growth in discrete time," Economics Letters, Elsevier, vol. 62(1), pages 139-145, January.
  3. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Papers 03/139, International Monetary Fund.
  4. Asfaha, Samuel, 2007. "National Revenue Funds: Their Efficacy for Fiscal Stability and Intergenerational Equity," MPRA Paper 7656, University Library of Munich, Germany.
  5. Philip R. Lane & Aaron Tornell, 1997. "Voracity and Growth," Harvard Institute of Economic Research Working Papers 1807, Harvard - Institute of Economic Research.
  6. Larson, Donald F. & Varangis, Panos & Yabuki, Nanae, 1998. "Commodity risk management and development," Policy Research Working Paper Series 1963, The World Bank.
  7. Everhart, Stephen & Duval-Hernandez, Robert, 2001. "Management of oil windfalls in Mexico : historical experience and policy options for the future," Policy Research Working Paper Series 2592, The World Bank.
  8. Segal, Paul, 2011. "Resource Rents, Redistribution, and Halving Global Poverty: The Resource Dividend," World Development, Elsevier, vol. 39(4), pages 475-489, April.
  9. Matthew kofi Ocran & Nicholas Biekpe, 2007. "The Role Of Commodity Prices In Macroeconomic Policy In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 75(2), pages 213-220, 06.
  10. Dehn, Jan, 2000. "The effects on growth of commodity price uncertainty and shocks," Policy Research Working Paper Series 2455, The World Bank.

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