Commodity Price Shocks and the Oddson Fiscal Performance

September 1, 2005

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Format: Chicago

Francis Y Kumah, and John J Matovu. Commodity Price Shocks and the Oddson Fiscal Performance, (USA: International Monetary Fund, 2005) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Unanticipated changes in commodity prices can generate significant movements in fiscal aggregates. This paper seeks to understand the dynamics of these fiscal movements in the context of transitory commodity price shocks using sample data from four CIS countries- two oil-producing and two non-oil commodity-intensive countries. It adopts a structural VAR approach and identifies the dynamic effects of commodity price shocks on fiscal performance under two broad tax regimes. Stochastic simulations indicate high probabilities of fiscal overperformance in the short term when commodity prices are high. These probabilities deteriorate significantly, however, in the long term after the transitory positive commodity price shock has dissipated, particularly when lax fiscal policy is adopted during the period of the price boom.

Subject: Commodity price fluctuations, Commodity price indexes, Commodity price shocks, Commodity prices, Expenditure, Prices

Keywords: Commodity exporter, Commodity price booms, Commodity price fluctuations, Commodity price indexes, Commodity price setup, Commodity price shock, Commodity price shocks, Commodity price stabilization scheme, Commodity prices, Commodity prices result, Expenditure decision, Export commodity, GDP innovation, GDP ratio, Price index, Price shock, Pro-cyclical fiscal policy, Significance level, Stabilization scheme, Structural VAR, Tax regime, Tax regimes, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/171
Stock No:

WPIEA2005171
ISBN:

9781451861907
ISSN:

1018-5941

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