Commodity price volatility, fiscal balance and real interest rate

Monoj Kumar Majumder, Mala Raghavan () and Joaquin Vespignani
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Monoj Kumar Majumder: Tasmanian School of Business & Economics, University of Tasmania, http://www.utas.edu.au/business-and-economics
Authors registered in the RePEc Author Service: Monoj Kumar Majumder and Monoj Kumar Majumder

No 2020-08, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: The objective of this study is to explore the impact of commodity price volatility on the governments’ fiscal balance. Using a dynamic panel data model for 108 countries from 1993 to 2018, this study finds that governments’ fiscal balance deteriorates with commodity price volatility. A one standard deviation increase in commodity price volatility leads to a reduction of approximately 0.04 units in the fiscal balance as a percentage of gross domestic product. In addition, we examine the role of real interest rates in influencing the relationship between commodity price volatility and fiscal balance. The empirical results suggest that the negative impact of commodity price volatility on fiscal balance can be mitigated with lower real interest rate.

Keywords: Commodity prices; commodity price volatility; fiscal balance; real interest rate (search for similar items in EconPapers)
JEL-codes: E58 E62 G01 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020
New Economics Papers: this item is included in nep-mac
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Published by the University of Tasmania. Discussion paper 2020-08

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Related works:
Working Paper: Commodity price volatility, fiscal balance and real interest rate (2020)
Working Paper: Commodity Price Volatility, Fiscal Balance and Real Interest Rate (2020)
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