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Commodity price fluctuations and their impact on monetary and fiscal policies in Western and Central Africa

Author

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  • Uwe Böwer
  • André Geis
  • Adalbert Winkler

Abstract

Commodity prices play an important role in economic developments in most of the 24 Western and Central African (WCA) countries covered in this paper. It is confirmed that in the light of rising commodity prices between 1999 and 2005, net oil exporters recorded strong growth rates while net oil-importing countries – albeit benefiting from increases in their major non-oil commodity export prices – displayed somewhat lower growth. For most WCA economies, inflation rates appear less affected by commodity price changes and more determined by exchange rate regimes as well as monetary and fiscal policies. While passthrough effects from international to domestic energy prices were significant, notably in oilimporting countries, second-round effects on overall prices seem limited. Governments of oil-rich countries reacted prudently to windfall revenues, partly running sizable fiscal surpluses. A favourable supply response to rising spending as well as sterilisation efforts and increasing money demand also helped to dampen inflationary pressures. However, substantial excess reserves of commercial banks reflect challenges in financial sector developments and the effectiveness of monetary policy in many WCA countries. Given currently widelyused fixed exchange rate regimes, fiscal policy will continue to carry the main burden of macroeconomic adjustment and of sustaining non-inflationary growth, which remains the key policy challenge facing WCA authorities.

Suggested Citation

  • Uwe Böwer & André Geis & Adalbert Winkler, 2007. "Commodity price fluctuations and their impact on monetary and fiscal policies in Western and Central Africa," Occasional Paper Series 60, European Central Bank.
  • Handle: RePEc:ecb:ecbops:20070060
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    Cited by:

    1. di Mauro, Filippo & Kaufmann, Robert K. & Karadeloglou, Pavlos, 2008. "Will oil prices decline over the long run?," Occasional Paper Series 98, European Central Bank.
    2. Strauch, Rolf & Gómez-Salvador, Ramón & Ward-Warmedinger, Melanie & Turunen, Jarkko & Leiner-Killinger, Nadine & Task Force of the Monetary Policy Committee of the ESCB & Masuch, Klaus, 2008. "Labour supply and employment in the euro area countries: developments and challenges," Occasional Paper Series 87, European Central Bank.
    3. Filippo Di Mauro & Katrin Forster, "undated". "Globalisation and the competitiveness of the Euro area," Working Papers 5, Department of the Treasury, Ministry of the Economy and of Finance.
    4. Irina Bunda, 2007. "The Changing Role of the Exchange Rate in a Globalised Economy," Post-Print halshs-00372820, HAL.
    5. Mehl, Arnaud & Bussière, Matthieu, 2008. "China's and India's roles in global trade and finance: twin titans for the new millennium?," Occasional Paper Series 80, European Central Bank.
    6. K. Barhoumi & S. Benk & R. Cristadoro & A. Den Reijer & A. Jakaitiene & P. Jelonek & A. Rua & K. Ruth & C. Van Nieuwenhuyze & G. Rünstler, 2008. "Short-term forecasting of GDP using large monthly datasets – A pseudo real-time forecast evaluation exercise," Working Paper Research 133, National Bank of Belgium.
    7. Gómez-Salvador, Ramón & Leiner-Killinger, Nadine, 2008. "An analysis of youth unemployment in the euro area," Occasional Paper Series 89, European Central Bank.
    8. Sturm, Michael & Adolf, Petra & Peschel, Dominik & Stráský, Jan, 2008. "The Gulf Cooperation Council countries: economic structures, recent developments and role in the global economy," Occasional Paper Series 92, European Central Bank.
    9. Cappiello, Lorenzo & Ferrucci, Gianluigi, 2008. "The sustainability of China's exchange rate policy and capital account liberalisation," Occasional Paper Series 82, European Central Bank.
    10. Mayerlen, Frank & Sola, Pierre & Be Duc, Louis, 2008. "The monetary presentation of the euro area balance of payments," Occasional Paper Series 96, European Central Bank.
    11. Sengupta, Jonaki & Nag, Ranjanendra Narayan & Goswami, Bhaskar, 2013. "Terms of trade, capital accumulation and the macro-economy in a developing country: a theoretical analysis," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(3), December.
    12. Diego Bastourre, 2008. "Inversores Financieros en los Mercados de Commodities: Un Modelo con Dinámica de Ajuste no Lineal al Equilibrio," Department of Economics, Working Papers 072, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    13. Winkler, Adalbert & Polański, Zbigniew, 2008. "Russia, EU enlargement and the euro," Occasional Paper Series 93, European Central Bank.
    14. International Monetary Fund, 2007. "Implications of Oil Inflows for Savings and Reserve Management in the Cemac," IMF Working Papers 07/243, International Monetary Fund.
    15. Poloni, Paolo & Agresti, Anna Maria & Baudino, Patrizia, 2008. "The ECB and IMF indicators for the macro-prudential analysis of the banking sector: a comparison of the two approaches," Occasional Paper Series 99, European Central Bank.
    16. Alisson Curátola de Melo, 2013. "Brazil’s Commodity Price Index," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Proceedings of the Sixth IFC Conference on "Statistical issues and activities in a changing environment", Basel, 28-29 August 2012., volume 36, pages 217-227 Bank for International Settlements.
    17. Blattner, Tobias & Catenaro, Marco & Ehrmann, Michael & Strauch, Rolf & Turunen, Jarkko, 2008. "The predictability of monetary policy," Occasional Paper Series 83, European Central Bank.
    18. Moutot, Philippe & Jung, Alexander & Mongelli, Francesco Paolo, 2008. "The working of the eurosystem: monetary policy preparations and decision-making - selected issues," Occasional Paper Series 79, European Central Bank.
    19. Fidora, Michael & Beck, Roland, 2008. "The impact of sovereign wealth funds on global financial markets," Occasional Paper Series 91, European Central Bank.
    20. De Santis, Roberto A. & Cappiello, Lorenzo & Baltzer, Markus & Manganelli, Simone, 2008. "Measuring financial integration in new EU Member States," Occasional Paper Series 81, European Central Bank.
    21. Klaus Masuch & Ramon Gómez-Salvador & Nadine Leiner-Killinger & Rolf Strauch & Jarkko Turunen & Melanie Ward-Warmedinger & Jan De Mulder & Harald Stahl & Yvonne McCarthy & Daphne Nicolitsas & Aitor La, 2008. "Labour supply and employment in the euro area countries - developments and challenges," Occasional Paper Series 87, European Central Bank.
    22. Morgese Borys, Magdalena & Polgár, Éva Katalin & Zlate, Andrei, 2008. "Real convergence and the determinants of growth in EU candidate and potential candidate countries: a panel data approach," Occasional Paper Series 86, European Central Bank.
    23. Winkler, Adalbert & Backé, Peter & Geis, André & Zumer, Tina & Bracke, Thierry & Habib, Maurizio Michael & Polgár, Éva Katalin & Chmielewski, Tomasz & Gardó, Sándor & de Lannoy, Anthony & Móré, Csaba , 2008. "Financial stability challenges in candidate countries managing the transition to deeper and more market-oriented financial systems," Occasional Paper Series 95, European Central Bank.
    24. Bastourre, Diego, 2008. "Cambio fundamental o especulación financiera en los mercados de commodities? Un modelo con ajuste no lineal al equilibrio
      [Structural break or financial speculation in commodity markets? A multivar
      ," MPRA Paper 9910, University Library of Munich, Germany.

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