## Commodity Price Shocks and Fiscal Outcomes

_IMF Working Papers, May 1, 2012_

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## Bibliographic details
- Authors: Issouf Samaké, Nikola Spatafora
- Published: May 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475503333.001

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### Summary
- Study period: 1990-2010.
- Main conclusion: Commodity prices have a significant impact on fiscal outcomes in developing countries.
- Revenue and expenditure both 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 of commodity price shocks.
- Foreign-exchange reserves do not dampen the effects of commodity price shocks.
- 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.

### Key findings
- Both revenue and expenditure increase when commodity import or export prices rise.
- Fiscal deficit response to commodity price shocks is ambiguous (no definitive directional effect reported).
- Exchange rate regime effects:
  - A floating exchange rate regime only partially offsets the fiscal impact of commodity price shocks.
- Foreign-exchange reserves:
  - Foreign-exchange reserves do not dampen the fiscal effects of commodity price shocks.
- Fiscal hedging:
  - Fiscal hedging is recommended.
  - Simple hedging instruments tied to a limited set of benchmark world prices for a narrow set of commodities can capture most potential benefits.

### Policy implications and recommendations
- Consider fiscal hedging strategies to manage exposure to commodity price volatility.
- Focus on hedging instruments that reference a limited set of benchmark world prices for a narrow set of commodities to achieve most of the benefits with potentially lower complexity.

### Publication and metadata
- Authors: Issouf Samaké, Nikola Spatafora
- Publication date: May 1, 2012
- Series: Working Paper No. 2012/112
- Issue: 112
- Volume: 2012
- Pages: 48
- DOI: https://doi.org/10.5089/9781475503333.001
- Stock No: WPIEA2012112
- ISBN: 9781475503333
- ISSN: 1018-5941

*Source: IMF Working Papers, "Commodity Price Shocks and Fiscal Outcomes" by Issouf Samaké and Nikola Spatafora (May 1, 2012).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/commodity-price-shocks-and-fiscal-outcomes-25892_