Fiscal Policy, the Real Exchange Rate and Commodity Prices

Author/Editor:

Carmen Reinhart

Publication Date:

October 1, 1990

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 role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.

Series:

Working Paper No. 90/91

Subject:

Notes:

Also published in Staff Papers, Vol. 38, No. 3, September 1991.

English

Publication Date:

October 1, 1990

ISBN/ISSN:

9781451851434/1018-5941

Stock No:

WPIEA0911990

Format:

Paper

Pages:

20

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