Macro-hedging for commodity exporters
This paper uses a dynamic optimization model to quantify the potential welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that hedging enhances domestic welfare through two channels: first, by reducing export income volatility; and second, by reducing the country's need to hold precautionary reserves and improving the country's ability to borrow against future export income. Under plausible calibrations of the model, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 101 (2013)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/devec|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher Carroll, 2005.
"The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems,"
Economics Working Paper Archive
520, The Johns Hopkins University,Department of Economics.
- Carroll, Christopher D., 2006. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," Economics Letters, Elsevier, vol. 91(3), pages 312-320, June.
- Christopher D. Carroll, 2005. "The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems," NBER Technical Working Papers 0309, National Bureau of Economic Research, Inc.
- Christopher Carroll, 2005. "Mathematica and Matlab Programs for The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems," Economics Companion Software Archive 3, The Johns Hopkins University,Department of Economics.
- Carroll, Christopher D., 2005. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," CFS Working Paper Series 2005/18, Center for Financial Studies (CFS).
- Jonathan David Ostry & Atish R. Ghosh, 1992.
"Macroeconomic Uncertainty, Precautionary Savings and the Current Account,"
IMF Working Papers
92/72, International Monetary Fund.
- Ghosh, Atish R. & Ostry, Jonathan D., 1997. "Macroeconomic uncertainty, precautionary saving, and the current account," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 121-139, September.
- Enrique G. Mendoza & Ceyhun Bora Durdu & Marco Terrones, 2007.
"Precautionary Demand for Foreign Assets in Sudden Stop Economies; An Assessment of the New Merchantilism,"
IMF Working Papers
07/146, International Monetary Fund.
- Durdu, Ceyhun Bora & Mendoza, Enrique G. & Terrones, Marco E., 2009. "Precautionary demand for foreign assets in Sudden Stop economies: An assessment of the New Mercantilism," Journal of Development Economics, Elsevier, vol. 89(2), pages 194-209, July.
- Ceyhun Bora Durdu & Enrique G. Mendoza & Marco E. Terrones, 2007. "Precautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Merchantilism," NBER Working Papers 13123, National Bureau of Economic Research, Inc.
- Marco E. Terrones & Enrique G. Mendoza & Ceyhun Bora Durdu, 2008. "Precautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Mercantilism," 2008 Meeting Papers 56, Society for Economic Dynamics.
- Ceyhun Bora Durdu & Enrique G. Mendoza & Marco E. Terrones, 2007. "Precautionary demand for foreign assets in sudden stop economies: an assessment of the new mercantilism," International Finance Discussion Papers 911, Board of Governors of the Federal Reserve System (U.S.).
- Engel, Eduardo & Valdés, Rodrigo O., 2001.
"Optimal fiscal strategy for oil exporting countries,"
Sede de la CEPAL en Santiago (Estudios e Investigaciones)
34818, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Eduardo M.R.A. Engel & Rodrigo Valdés, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," Documentos de Trabajo 78, Centro de Economía Aplicada, Universidad de Chile.
- Rodrigo O. Valdes & Eduardo M Engel, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," IMF Working Papers 00/118, International Monetary Fund.
- Caballero, Ricardo J. & Panageas, Stavros, 2008.
"Hedging sudden stops and precautionary contractions,"
Journal of Development Economics,
Elsevier, vol. 85(1-2), pages 28-57, February.
- Ricardo J. Caballero & Stavros Panageas, 2003. "Hedging Sudden Stops and Precautionary Contractions," NBER Working Papers 9778, National Bureau of Economic Research, Inc.
- Paul Cashin & Hong Liang & C. John McDermott, 2000.
"How Persistent Are Shocks to World Commodity Prices?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 47(2), pages 2.
- Hong Liang & C. John McDermott & Paul Cashin, 1999. "How Persistent Are Shocks to World Commodity Prices?," IMF Working Papers 99/80, International Monetary Fund.
- Arrau, Patricio & Claessens, Stijn, 1992. "Commodity stabilization funds," Policy Research Working Paper Series 835, The World Bank.
- Pagano Patrizio & Pisani Massimiliano, 2009.
"Risk-Adjusted Forecasts of Oil Prices,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 9(1), pages 1-28, June.
- Pagano, Patrizio & Pisani, Massimiliano, 2009. "Risk-adjusted forecasts of oil prices," Working Paper Series 0999, European Central Bank.
- Patrizio Pagano & Massimiliano Pisani, 2006. "Risk-Adjusted Forecasts of Oil Prices," Temi di discussione (Economic working papers) 585, Bank of Italy, Economic Research and International Relations Area.
- Grossman, Herschel I & Van Huyck, John B, 1988.
"Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation,"
American Economic Review,
American Economic Association, vol. 78(5), pages 1088-97, December.
- Herschel I. Grossman & John B. Van Huyck, 1985. "Sovereign Debt as a Contingent Claim: Excusable Default, Repudiation, and Reputation," NBER Working Papers 1673, National Bureau of Economic Research, Inc.
- Deaton, A., 1989.
"Saving And Liquidity Constraints,"
153, Princeton, Woodrow Wilson School - Public and International Affairs.
- Stephane Pallage & Michel A. Robe, 2003. "On the Welfare Cost of Economic Fluctuations in Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 677-698, 05.
- Cristina Arellano, 2008.
"Default Risk and Income Fluctuations in Emerging Economies,"
American Economic Review,
American Economic Association, vol. 98(3), pages 690-712, June.
- Arellano, Cristina, 2008. "Default risk and income fluctuations in emerging economies," MPRA Paper 7867, University Library of Munich, Germany.
- Paolo Mauro & Torbjorn I. Becker & Jonathan David Ostry & Romain Ranciere & Olivier D Jeanne, 2007. "Country Insurance; The Role of Domestic Policies," IMF Occasional Papers 254, International Monetary Fund.
- Powell, Andrew, 1989. "The Management of Risk in Developing Country Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 69-87, Winter.
- Rudolfs Bems & Irineu E de Carvalho Filho, 2009. "Current Account and Precautionary Savings for Exporters of Exhaustible Resources," IMF Working Papers 09/33, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:eee:deveco:v:101:y:2013:i:c:p:105-116. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.