The Adjustment to Commodity Price Shocks in Chile, Colombia, and Peru

September 29, 2017

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Format: Chicago

Francisco Roch. The Adjustment to Commodity Price Shocks in Chile, Colombia, and Peru, (USA: International Monetary Fund, 2017) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper presents a comparative analysis of the macroeconomic adjustment in Chile, Colombia, and Peru to commodity terms-of-trade shocks. The study is done in two steps: (i) an analysis of the impulse responses of key macroeconomic variables to terms-of-trade shocks and (ii) an event study of the adjustment to the recent decline in commodity prices. The experiences of these countries highlight the importance of flexible exchange rates to help with the adjustment to lower commodity prices, and staying vigilant in addressing depreciation pressures on inflation through tightening monetary policies. On the fiscal front, evidence shows that greater fiscal space, like in Chile and Peru, gives more room for accommodating terms-of-trade shocks.

Subject: Balance of payments, Commodity price shocks, Commodity prices, Current account, Current account deficits, Prices, Technology, Technology transfer

Keywords: Adjustment to commodity price, Chile, Colombia, Colombia t, Commodity, Commodity exporters' emerging economies, Commodity price, Commodity price shocks, Commodity Prices, Contribution of commodity price, Country-specific commodity price index, Current account, Current account deficits, Effects of commodity-price fluctuation, Fiscal Policy, Flexible Exchange Rates, Large commodity price shock, Oil price decline, Peru, Peru t, Propagation mechanism of commodity price shock, Shock to commodity price, Sub-Saharan Africa, Technology transfer, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/208
Stock No:

WPIEA2017208
ISBN:

9781484320648
ISSN:

1018-5941

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