Commodity Price Shocks and Fiscal Outcomes

Issouf Samaké and Nikola Spatafora

No 2012/112, IMF Working Papers from International Monetary Fund

Abstract: The experience of developing countries over 1990-2010 indicates that commodity prices have a significant impact on fiscal outcomes. Both revenue and expenditure rise in response to commodity (import or export) price increases; the response of the fiscal deficit is ambiguous. A floating exchange rate regime only partially offsets the impact; foreign-exchange reserves do not dampen the effects. Hence, there is a strong case for fiscal hedging against commodity price shocks. Hedging instruments based on a limited set of benchmark world prices for a narrow set of commodities may suffice to realize most of the potential benefits.

Keywords: WP; commodity export price; commodity price; exchange rate; commodity exporter; commodity import price (search for similar items in EconPapers)
Pages: 48
Date: 2012-05-01
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Citations: View citations in EconPapers (23)

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