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Commodity Price Shocks and Fiscal Outcomes

Author

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  • Issouf Samaké
  • Nicola Spatafora

Abstract

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.

Suggested Citation

  • Issouf Samaké & Nicola Spatafora, 2012. "Commodity Price Shocks and Fiscal Outcomes," IMF Working Papers 12/112, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/112
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    References listed on IDEAS

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    1. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters,in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
    2. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    3. Borensztein, Eduardo & Jeanne, Olivier & Sandri, Damiano, 2013. "Macro-hedging for commodity exporters," Journal of Development Economics, Elsevier, vol. 101(C), pages 105-116.
    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. Leandro Medina, 2010. "The Dynamic Effects of Commodity Prices on Fiscal Performance in Latin America," IMF Working Papers 10/192, International Monetary Fund.
    6. 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.
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    Cited by:

    1. López-Martín Bernabé & Leal-Ordoñez Julio C. & Martínez André, 2017. "Commodity Price Risk Management and Fiscal Policy in a Sovereign Default Model," Working Papers 2017-04, Banco de México.
    2. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Keyra Primus, 2016. "Fiscal Rules for Resource Windfall Allocation; The Case of Trinidad and Tobago," IMF Working Papers 16/188, International Monetary Fund.
    4. Hélène Ehrhart & Samuel Guerineau, 2012. "Commodity price volatility and Tax revenues: Evidence from developing countries," Working Papers halshs-00658210, HAL.

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