Commodity Prices, Financial Frictions, and Macroprudential Policies

Shigeto Kitano and Kenya Takaku
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Kenya Takaku: Faculty of International Studies, Hiroshima City University, JAPAN

No DP2023-21, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Fluctuations in commodity prices have significant effects on output and financial stability in emerging countries. We examine the effect of macroprudential policies on commodity-exporting countries, which consist of two sectors---the commodity-producing sector and final goods sector. When a commodity-exporting country suffers from volatile fluctuations in commodity prices, we find that macroprudential policy in each sector is welfare-enhancing and that it is optimal to impose macroprudential policies in both sectors. We also show that macroprudential policies are more effective in improving welfare for commodity-exporting economies suffering from a stronger link between commodity prices and interest rate spreads, higher sensitivity of interest spreads to debt, and larger commodity price shocks.

Keywords: Macroprudential policies; Commodity-exporting countries; DSGE model; Financial frictions; Emerging economies; Mongolia (search for similar items in EconPapers)
JEL-codes: E32 E44 F32 O20 Q48 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2023-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg, nep-ifn, nep-mac, nep-mon and nep-opm
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