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The dynamic response of the Current Account to Commodity Prices shocks in Mining and Non-mining exporting economies

Author

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  • Pérez Forero, Fernando

    (Banco Central de Reserva del Perú)

  • Serván, Sergio

    (Banco Central de Reserva del Perú)

Abstract

The boom and bust of Commodity Prices have had a signi cant macroeconomic impact on commodity-exporter economies. This paper assesses the dynamic impact of Commodity Prices on the Current Account surplus for several commodity-exporter economies. Because these economies share several economic features, and since they are subject to the same external shocks, it is necessary to estimate their behavior simultaneously. Moreover, the impact of these shocks might be di erent along the sample of analysis. Thus, we estimate a Panel VAR model with dynamic inter-dependencies and time varying parameters. Within this framework, we have computed an average current account indicator and studied the responses of individual current account balances to shocks in fuel and metal prices. We have found that our common indicator for the current account follows closely the dynamic pattern of the commodity price index i.e. surpluses (de cit) are usually associated with increases (decreases) in commodity prices, and this indicator is statistically signi cant across the sample of analysis. At the country level, by comparing the impulse response functions, we found that commodity price shocks have a similar e ect across countries, although their magnitude di er. In general, our results suggest that the impact on the current account balances have increased since 2002. In the case of a fuel shock, we do not found signi cant current account responses. However, the evidence for a metal shock is more robust, with higher responses in the case of the metal-exporting countries.

Suggested Citation

  • Pérez Forero, Fernando & Serván, Sergio, 2016. "The dynamic response of the Current Account to Commodity Prices shocks in Mining and Non-mining exporting economies," Working Papers 2016-012, Banco Central de Reserva del Perú.
  • Handle: RePEc:rbp:wpaper:2016-012
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    More about this item

    Keywords

    Commodity Prices; Current Account; Panel Vector Autoregressions; Bayesian Methods;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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