Macro-hedging for commodity exporters

Eduardo Borensztein, Olivier Jeanne and Damiano Sandri

Journal of Development Economics, 2013, vol. 101, issue C, 105-116

Abstract: This paper uses a dynamic optimization model to quantify the potential welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that hedging enhances domestic welfare through two channels: first, by reducing export income volatility; and second, by reducing the country's need to hold precautionary reserves and improving the country's ability to borrow against future export income. Under plausible calibrations of the model, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.

Keywords: Hedging; Commodity exports; Precautionary savings; International reserves; Futures; Options; Default (search for similar items in EconPapers)
JEL-codes: C61 E21 F30 F40 G13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304387812000697
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Macro-Hedging for Commodity Exporters (2010)
Working Paper: Macro-Hedging for Commodity Exporters (2009)
Working Paper: Macro-Hedging for Commodity Exporters (2009)
Working Paper: Macro-Hedging for Commodity Exporters (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:101:y:2013:i:c:p:105-116

DOI: 10.1016/j.jdeveco.2012.08.005

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().