Commodity Booms and Government Expenditure Responses

BySanjeev Gupta, Kenneth M. Miranda

May 1, 1991

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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

This paper develops a model incorporating asymmetric government expenditure behavior in response to a windfall revenue gain occasioned by a transitory commodity boom. The model is used to illustrate the transitional dynamics of a stylized economy during the boom period and the nature of the macroeconomic disequilibria which emerge in the post-boom period. Country case studies of Sri Lanka, Malaysia, and Kenya support the model’s predictions and the protracted nature of adjustment following the waning of the boom.

Subject: Commodities, Commodity booms, Expenditure, Exports, Foreign exchange, International trade, Real exchange rates, Trade balance

Keywords: commodity boom, Commodity booms, commodity price bust, current account, exchange rate, Exports, price boom, Real exchange rates, Trade balance, traded goods, world commodity cycle, WP

Pages:
44
Volume:
1991
DOI:
https://doi.org/10.5089/9781451846362.001
Issue:
044
Series:
Working Paper No. 1991/044
Stock No:
WPIEA0441991
ISBN:
9781451846362
ISSN:
1018-5941

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Notes

Includes country experiences for Kenya, Malaysia and Sri Lank.

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