Commodity Price Shocks and Fiscal Outcomes

Author/Editor:

Issouf Samaké ; Nikola Spatafora

Publication Date:

May 1, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2012/112

Subject:

Commodities Commodity price fluctuations Commodity prices Exchange rate arrangements Export prices

English

Publication Date:

May 1, 2012

ISBN/ISSN:

9781475503333/1018-5941

Stock No:

WPIEA2012112

Pages:

48

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