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Effect of Sovereign Wealth Funds in Commodity-Exporting Economies when Commodity Prices Affect Interest Spreads

Author

Listed:
  • Shigeto Kitano

    (Research Institute for Economics and Business Administration, Kobe University, JAPAN)

  • Kenya Takaku

    (Faculty of International Studies, Hiroshima City University, JAPAN)

Abstract

We reconsider the role of a sovereign wealth fund in commodity-exporting economies facing recent volatile fluctuations of commodity prices due to the COVID-19 shock. We examine the welfare-improving effect of a sovereign wealth fund from the new perspective of the link between commodity prices and interest rate spreads, which is unique to emerging economies. We show that a sovereign wealth fund becomes more effective in improving welfare for commodity-exporting economies with a stronger link between their commodity prices and interest rate spreads.

Suggested Citation

  • Shigeto Kitano & Kenya Takaku, 2021. "Effect of Sovereign Wealth Funds in Commodity-Exporting Economies when Commodity Prices Affect Interest Spreads," Discussion Paper Series DP2021-22, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2023.
    • Handle: RePEc:kob:dpaper:dp2021-22
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2021-22.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Sovereign wealth fund; Commodity prices; Interest rate spreads; DSGE model; Financial frictions; Emerging economies;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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