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Commodity markets and the international transmission of fiscal shocks

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  • Reinhart, Carmen

Abstract

The "engine of growth" argument holds that an economic expansion in a large country increases the growth of its trading partners. Growth in developing countries is routinely linked to growth patterns in the Industrial economies. This paper examines the role of commodity markets in transmitting disturbances internationally and finds that contrary to the implications of the "engine of growth" argument, a fiscal-induced expansion in a large commodity-importing country could either increase or decrease growth in the developing commodity-exporting country, and unambiguously reduces output in the second commodity-importing country.

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  • Reinhart, Carmen, 1988. "Commodity markets and the international transmission of fiscal shocks," MPRA Paper 13411, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13411
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    Cited by:

    1. John Baffes & Cristina Savescu, 2014. "Monetary conditions and metal prices," Applied Economics Letters, Taylor & Francis Journals, vol. 21(7), pages 447-452, May.
    2. 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.
    3. 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.
    4. Cuddington, John T. & Liang, Hong, "undated". "Will the Emergence of the Euro Affect World Commodity Prices?," WIDER Working Papers 295505, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    5. John Baffes & Tassos Haniotis, 2016. "What Explains Agricultural Price Movements?," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 706-721, September.
    6. Luis E. Arango & Fernando Arias & Adriana Flórez, 2012. "Determinants of commodity prices," Applied Economics, Taylor & Francis Journals, vol. 44(2), pages 135-145, January.
    7. John Baffes & Xiaoli L. Etienne, 2016. "Analysing food price trends in the context of Engel’s Law and the Prebisch-Singer hypothesis," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 688-713.
    8. 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.
    9. Eduardo Borensztein & Carmen M. Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 236-261, June.
    10. 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.
    11. John Baffes & Damir Cosic, 2014. "Global Economic Prospects : Commodity Markets Outlook, January 2014," World Bank Publications, The World Bank, number 18996.
    12. 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.
    13. Baffes, John & Dennis, Allen, 2013. "Long-term drivers of food prices," Policy Research Working Paper Series 6455, The World Bank.
    14. 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.
    15. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Money Affairs, CEMLA, vol. 0(1), pages 1-30, January-J.
    16. Chen, Peng & Miao, Xinru, 2024. "Understanding the role of China's factors in international commodity price fluctuations: A perspective of monetary-fiscal policy interaction," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1464-1483.
    17. Luis Eduardo Arango & Fernando Arias & Luz Adriana Flórez, 2008. "Trends, Fluctuations, and Determinants of Commodity Prices," Borradores de Economia 4734, Banco de la Republica.
    18. 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.
    19. 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.

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    More about this item

    Keywords

    commodity prices fiscal policy trade exports;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F10 - International Economics - - Trade - - - General

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