The Dynamic Effects of Commodity Prices on Fiscal Performance in Latin America

August 1, 2010

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Format: Chicago

Leandro Medina. The Dynamic Effects of Commodity Prices on Fiscal Performance in Latin America, (USA: International Monetary Fund, 2010) accessed November 21, 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

The recent boom and bust in commodity prices has raised concerns about the impact of volatile commodity prices on Latin American countries’ fiscal positions. Using a novel quarterly data set-which includes unique country-specific commodity price indices and a comprehensive measure of public expenditures-this paper analyzes the dynamic effects of commodity price fluctuations on fiscal revenues and expenditures for eight commodity-exporting Latin American countries. The results indicate that Latin American countries’ fiscal positions react strongly to shocks to commodity prices, yet there are marked differences across countries. Fiscal variables in Venezuela display the highest sensitivity to commodity price shocks, with expenditures reacting significantly more than revenues. At the other end of the spectrum, in Chile expenditure reacts very little to commodity price fluctuations, and the dynamic responses of its fiscal indicators are very similar to those seen in high-income commodity-exporting countries. This distinct behavior across countries may relate to institutional arrangements, which in some cases include the efficient application of fiscal rules amid political commitment and high standards of transparency.

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

Keywords: Commodity, Commodity export price index, Country, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/192
Stock No:

WPIEA2010192
ISBN:

9781455202263
ISSN:

1018-5941

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