Fiscal Policy, the Real Exchange Rate and Commodity Prices

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.

Subject: Commodities, Commodity prices, Consumption, Fiscal policy, Foreign exchange, National accounts, Prices, Real exchange rates

Keywords: commodity exporter, commodity index, commodity input, Commodity prices, commodity supplier, Consumption, debtor country, developing country, home good, Real exchange rates, world commodity supply, WP

Pages:
20
Volume:
1990
DOI:
---
Issue:
091
Series:
Working Paper No. 1990/091
Stock No:
WPIEA0911990
ISBN:
9781451851434
ISSN:
1018-5941

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Notes

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

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