The dynamic response of the Current Account to Commodity Prices shocks in Mining and Non-mining exporting economies

Fernando Pérez Forero (fernando.perez@bcrp.gob.pe) and Sergio Serván
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Sergio Serván: Banco Central de Reserva del Perú

No 2016-012, Working Papers from Banco Central de Reserva del Perú

Abstract: The boom and bust of Commodity Prices have had a signi cant macroeconomic impact on commodity-exporter economies. This paper assesses the dynamic impact of Commodity Prices on the Current Account surplus for several commodity-exporter economies. Because these economies share several economic features, and since they are subject to the same external shocks, it is necessary to estimate their behavior simultaneously. Moreover, the impact of these shocks might be di erent along the sample of analysis. Thus, we estimate a Panel VAR model with dynamic inter-dependencies and time varying parameters. Within this framework, we have computed an average current account indicator and studied the responses of individual current account balances to shocks in fuel and metal prices. We have found that our common indicator for the current account follows closely the dynamic pattern of the commodity price index i.e. surpluses (de cit) are usually associated with increases (decreases) in commodity prices, and this indicator is statistically signi cant across the sample of analysis. At the country level, by comparing the impulse response functions, we found that commodity price shocks have a similar e ect across countries, although their magnitude di er. In general, our results suggest that the impact on the current account balances have increased since 2002. In the case of a fuel shock, we do not found signi cant current account responses. However, the evidence for a metal shock is more robust, with higher responses in the case of the metal-exporting countries.

Keywords: Commodity Prices; Current Account; Panel Vector Autoregressions; Bayesian Methods (search for similar items in EconPapers)
JEL-codes: C11 C33 E32 F42 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-mac and nep-opm
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