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Fiscal policy, the real exchange rate and commodity prices: A global framework

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  • Reinhart, Carmen

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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File URL: http://mpra.ub.uni-muenchen.de/14102/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14102.

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Date of creation: 1990
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Publication status: Published in IMF Staff Papers 3.38(1991): pp. 508-524
Handle: RePEc:pra:mprapa:14102

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Keywords: commodity prices fiscal policy world demand real exchange rate debt;

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  1. Rudiger Dornbusch, 1985. "Policy and Performance Links between LDC Debtors and Industrial Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 303-368.
  2. Joshua Aizenman & Eduardo R. Borensztein, 1988. "Debt and Conditionality under Endogenous Terms of Trade Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 686-713, December.
  3. Reinhart, Carmen, 1988. "Commodity markets and the international transmission of fiscal shocks," MPRA Paper 13411, University Library of Munich, Germany.
  4. Alan C. Stockman, 1986. "Fiscal Policies and International Financial Markets," NBER Working Papers 1961, National Bureau of Economic Research, Inc.
  5. Jacob A. Frenkel & Michael L. Mussa, 1985. "Asset Markets, Exchange Rates and the Balance of Payments," NBER Working Papers 1287, National Bureau of Economic Research, Inc.
  6. 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.
  7. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  8. Giovannini, Alberto, 1988. "The real exchange rate, the capital stock, and fiscal policy," European Economic Review, Elsevier, vol. 32(9), pages 1747-1767, November.
  9. 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.
  10. 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.
  11. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747 Elsevier.
  12. 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.
  13. Paul R. Krugman, 1980. "Oil and the Dollar," NBER Working Papers 0554, National Bureau of Economic Research, Inc.
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