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Fiscal Policy, the Real Exchange Rate and Commodity Prices

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  • Ms. Carmen Reinhart

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.

Suggested Citation

  • Ms. Carmen Reinhart, 1990. "Fiscal Policy, the Real Exchange Rate and Commodity Prices," IMF Working Papers 1990/091, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:1990/091
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    1. Carmen M. Reinhart, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 506-524, September.
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    9. Carmen M. Reinhart, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 506-524, September.
    10. 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.
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    12. Giovannini, Alberto, 1988. "The real exchange rate, the capital stock, and fiscal policy," European Economic Review, Elsevier, vol. 32(9), pages 1747-1767, November.
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    Cited by:

    1. Carmen M. Reinhart, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 506-524, September.
    2. John Baffes & Cristina Savescu, 2014. "Monetary conditions and metal prices," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 447-452, May.
    3. Carmen M. Reinhart, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 506-524, September.
    4. Arango-Thomas, Luis Eduardo & Chavarro-Sanchez, Ximena & González-Molano, Eliana Rocío, 2013. "Precios de bienes primarios e inflación en Colombia," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 12, pages 487-532, Banco de la Republica de Colombia.
    5. Simona Delle Chiaie & Laurent Ferrara & Domenico Giannone, 2022. "Common factors of commodity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(3), pages 461-476, April.
    6. Baffes, John & Dennis, Allen, 2013. "Long-term drivers of food prices," Policy Research Working Paper Series 6455, The World Bank.
    7. John Baffes & Tassos Haniotis, 2016. "What Explains Agricultural Price Movements?," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 706-721, September.
    8. Eduardo Borensztein & Carmen M. Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 236-261, June.
    9. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.
    10. Luis E. Arango & Fernando Arias & Adriana Flórez, 2012. "Determinants of commodity prices," Applied Economics, Taylor & Francis Journals, vol. 44(2), pages 135-145, January.
    11. Ms. Hong Liang & Mr. John T. Cuddington, 2000. "Will the Emergence of the Euro Affect World Commodity Prices?," IMF Working Papers 2000/208, International Monetary Fund.
    12. Baffes,John & Etienne,Xiaoli Liao, 2015. "Analyzing food price trends in the context of Engel?s law and the Prebisch-Singer hypothesis," Policy Research Working Paper Series 7424, The World Bank.
    13. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(1), pages 1-30, January-J.
    14. Luis Eduardo Arango & Fernando Arias & Luz Adriana Flórez, 2008. "Trends, Fluctuations, and Determinants of Commodity Prices," BORRADORES DE ECONOMIA 004734, BANCO DE LA REPÚBLICA.
    15. Néstor Adrián le Clech, 2013. "Determinantes del precio internacional de la soja," Economic Analysis Working Papers (2002-2010). Atlantic Review of Economics (2011-2016), Colexio de Economistas de A Coruña, Spain and Fundación Una Galicia Moderna, vol. 2, pages 1-1, December.
    16. Webber, Anthony G, 1997. "Australian Commodity Export Pass-through and Feedback Causality from Commodity Prices to the Exchange Rate," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 55-68, June.
    17. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.

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    More about this item

    Keywords

    WP; developing country; world commodity supply; commodity supplier; commodity exporter; debtor country; commodity input; home good; commodity index; Real exchange rates; Commodity prices; Consumption;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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