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Commodity Price Shocks and Fiscal Outcomes

  • Issouf Samaké
  • Nicola Spatafora

The experience of developing countries over 1990-2010 indicates that commodity prices have a significant impact on fiscal outcomes. Both revenue and expenditure rise in response to commodity (import or export) price increases; the response of the fiscal deficit is ambiguous. A floating exchange rate regime only partially offsets the impact; foreign-exchange reserves do not dampen the effects. Hence, there is a strong case for fiscal hedging against commodity price shocks. Hedging instruments based on a limited set of benchmark world prices for a narrow set of commodities may suffice to realize most of the potential benefits.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/112.

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Length: 48
Date of creation: 01 May 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/112
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  1. Eduardo Borensztein & Olivier Jeanne & Damiano Sandri, 2009. "Macro-Hedging for Commodity Exporters," NBER Working Papers 15452, National Bureau of Economic Research, Inc.
  2. Martin, Will & Anderson, Kym, 2011. "Export restrictions and price insulation during commodity price booms," Policy Research Working Paper Series 5645, The World Bank.
  3. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  4. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  5. Minot, Nicholas, 2010. "Transmission of World Food Price Changes to African Markets and its Effect on Household Welfare," Food Security Collaborative Working Papers 58563, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  6. Leandro Medina, 2010. "The Dynamic Effects of Commodity Priceson Fiscal Performance in Latin America," IMF Working Papers 10/192, International Monetary Fund.
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