Commodity Price Shocks and Fiscal Outcomes
Electronic Access:
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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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