Cookies?
Library Header Image
LSE Research Online LSE Library Services

Macroeconomic performance during commodity price booms and busts

Céspedes, Luis Felipe and Velasco Branes, Andres (2012) Macroeconomic performance during commodity price booms and busts. IMF Economic Review, 60 (4). pp. 570-599. ISSN 2041-4161

Full text not available from this repository.

Identification Number: 10.1057/imfer.2012.22

Abstract

Fluctuations in commodity prices are often associated with macroeconomic volatility. But not all nations are created equal in this regard. The macro response to commodity booms and busts depends both on the structural characteristics of the economy and on the policy framework that is in place. This paper investigates the macro response of a group of commodity-producing nations in episodes of large commodity prices shocks. First, it provides a theoretical framework to analyze how shocks to commodity prices affect the domestic economy. For this the paper uses a simple open-economy model with nominal rigidities and financial frictions. Then it provides empirical evidence (using commodity price boom and bust episodes) that commodity price shocks have a significant impact on output and investment dynamics. Economies with more flexible exchange rate regimes exhibit less pronounced responses of output during these episodes. The paper also provides evidence that the impact of those shocks on investment tends to be larger for economies with less developed financial markets. Moreover, it finds that international reserve accumulation, more stable political systems, and less open capital accounts tend to reduce the real exchange rate appreciation (depreciation) in episodes of commodity price booms (busts).

Item Type: Article
Additional Information: © 2012 International Monetary Fund
Divisions: School of Public Policy
?? SCPP ??
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy (Targets, Instruments, and Effects)
F - International Economics > F3 - International Finance > F30 - General
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Date Deposited: 10 Oct 2019 16:09
Last Modified: 20 Oct 2019 03:10
URI: http://eprints.lse.ac.uk/id/eprint/102051

Actions (login required)

View Item View Item