Shocks and Shields: Macroeconomic Institutions During Commodity Price Swings

Rabah Arezki, Patrick Imam (), Kangni Kpodar and Dao Le-Van

No 2025/015, IMF Working Papers from International Monetary Fund

Abstract: Countries facing commodity (net) export price shocks tend to implement fiscal rules and to financially close their economies, demonstrating “macroeconomic prudence”. These effects are (unsurprisingly) asymmetric between import and export price shocks. The impact of commodity (net) export prices on macroeconomic institutions is influenced by the intensity of shocks and income levels of the countries, with higher-income countries driving the main results. These findings remain robust across various checks, including different estimators and additional control and dependent variables. These findings suggest that macroeconomic institutions are reactive to terms of trade shocks stemming from commodity price fluctuations.

Keywords: Commodity prices; macroeconomic institutions; natural resources; resource curse; price shock; commodity export; commodity terms of trade shock; impact of commodity; commodity export windfall; Commodity price shocks; Fiscal rules; Export prices; Exchange rate arrangements; Global (search for similar items in EconPapers)
Pages: 31
Date: 2025-01-17
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