 Macroeconomic stabilization of primary commodities price cycles in developing economiesCarlos García and Jesisbé Mejía Journal of Policy Modeling, 2018, vol. 40, issue 5, 1050-1066 Abstract: This paper proposes a strategy for stabilizing macroeconomic policy to address jointly the effects of changes in the prices of food, minerals and energy (oil). Our approach differs from the general literature, which analyzes the effects of a commodity boom or bust and therefore the solutions in terms of economic policy separately, that is, by type of commodity. The stabilization strategy that we propose considers a key fact affecting many open economies, namely, that they not only are affected by increases or decreases in commodity prices, but also benefit from them. Consequently, we use a structural model for an open economy with restricted households to show that welfare could be improved with a fiscal rule incorporating transfers to stabilize household consumption. This strategy noticeably dominates an aggressive monetary policy focused only on stabilizing inflation and a fiscal policy that has an excessive bias toward saving income from exports. Keywords: Commodity price boom; Optimal fiscal and monetary policy; Structural models (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:40:y:2018:i:5:p:1050-1066 DOI: 10.1016/j.jpolmod.2018.07.004 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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