Terms of Trade Shocks and Fiscal Cycles

Graciela Kaminsky ()

No 15780, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The latest boom in commodity prices fueled concerns about fiscal policies in commodity-exporting countries, with many claiming that it triggered loose fiscal policy and left no funds for a rainy day. This paper examines the links between fiscal policy and terms-of-trade fluctuations using a sample of 74 countries, both developed and developing. It finds evidence that booms in the terms of trade do not necessarily lead to larger government surpluses in developing countries, particularly in emerging markets and especially during capital flow bonanzas. This is not the case in OECD countries, where fiscal policy is of an acyclical nature.

JEL-codes: E3 E62 F41 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-opm
Note: IFM
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Citations: View citations in EconPapers (21)

Published as Graciela L Kaminsky, 2010. "Terms of Trade Shocks and Fiscal Cycles," RBA Annual Conference Volume, in: Renée Fry & Callum Jones & Christopher Kent (ed.), Inflation in an Era of Relative Price Shocks Reserve Bank of Australia.

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