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Essays On The Effects Of International Commodity Prices Shocks
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Book Synopsis Essays on the Effects of International Commodity Prices Shocks by : Mauricio Stern
Download or read book Essays on the Effects of International Commodity Prices Shocks written by Mauricio Stern and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many emerging economies depend on commodities whose prices are volatile. High prices for these commodities naturally help those sectors related to the production of the commodities, but the economic benefits for other sectors are ambiguous. These effects can be different according to the characteristics of the sector, leading to a positive or negative sectoral effect depending on several features. Also, commodity price shocks may affect spending differently according to the characteristics of the population. A feature prevalent in many emerging economies is a low degree of banking penetration, which can affect the magnitude of commodity shocks, because banking services are related to how people save and borrow, affecting their ability to smooth spending when they face income shocks. This dissertation studies the effects of commodity price shocks in exporting economies, analyzing the overall and sectoral effects, as well as the regional effects according to access to banking services among inhabitants. The first chapter analyzes the effect of commodity price fluctuations on both overall and sectoral outcomes in a commodity-exporting economy. Using Chilean and international copper market data, I find positive copper price changes stemming from copper-specific demand shocks generate a broad GDP expansion with no visible decline in the exports of any sector, including manufacturing. These results provide evidence against the Dutch disease hypothesis involving the crowding out effect of commodity price increases on the manufacturing sector. The second chapter studies how features of a commodity-exporting economy such as the degree of substitution between domestic and foreign goods, the income effect on labor supply, and trade policy related to tariffs on imports shape overall and sectoral effects of commodity price shocks. For that, I estimate key structural parameters of a small open economy business-cycle model with 6 sectors by matching my empirical impulse responses and find that a low degree of substitution between domestic and foreign goods explains the positive sectoral effect of a commodity price shock. Then, I evaluate how tariffs on imports shape the effect of commodity price shocks and find low tariffs make the small open economy less sensitive to commodity price shocks when the elasticity of substitution between domestic goods and imports is small. The third chapter studies the relationship between access to banking services and the magnitude of external shocks. Using quarterly data of the number of checking and savings bank accounts per person as an indicator of access to banking services, I analyze the effects of commodity price changes conditional on the number of bank accounts per person across Mexican states. I find decreases in commodity prices generate a bigger contraction in total production in states with low numbers of bank accounts per person. A rise in commodity prices generates a bigger expansion of the number of formal workers as well as a wider contraction in the number of informal workers in regions with a low number of bank accounts per person
Book Synopsis Essays on International Macroeconomics by : Daniel Rees
Download or read book Essays on International Macroeconomics written by Daniel Rees and published by . This book was released on 2013 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the impact of terms of trade shocks on commodity-exporting small, open economies. The first chapter examines whether households, firms and policymakers in these economies can distinguish between temporary and permanent commodity price shocks. I find that they are largely unable to do so. In fact, my model suggests that the expected future path of commodity prices following a temporary price shock is almost identical to the expected future path of commodity prices following a permanent price shock. However, I also find that these information frictions reduce the magnitude of business cycle fluctuations, contrary to popular belief. In the second chapter I describe optimal monetary policy in an environment where agents cannot directly observe whether commodity price shocks are temporary or permanent and where an economy's non-commodity sector features a learning-by-doing externality. I find that under optimal monetary policy the non-commodity sector contracts by more during a transitory commodity price boom under incomplete information than it does under full information, but by less during a permanent boom. I also examine the performance of simple monetary policy rules. A policy of responding strongly to deviations of home-produced goods inflation from target with a modest response to changes in the nominal exchange rate comes close to replicating the welfare outcomes of optimal policy. In contrast, an exchange rate peg generally produces large welfare losses. The third chapter, co-authored with my classmate Patricia Gomez-Gonzales, examines the consequences of changes in the volatility of commodity price shocks on commodity exporters. We first demonstrate the existence of time-varying volatility in the terms of trade of a selection of commodity-exporting small open economies. We then show empirically that increases in terms of trade volatility trigger a contraction in domestic consumption and investment and an improvement in the trade balance in these economies. Finally, we construct a theoretical model and demonstrate that it can replicate our empirical results.
Book Synopsis Commodity Price Shocks and Financial Sector Fragility by : Mr.Tidiane Kinda
Download or read book Commodity Price Shocks and Financial Sector Fragility written by Mr.Tidiane Kinda and published by International Monetary Fund. This book was released on 2016-02-01 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the impact of commodity price shocks on financial sector fragility. Using a large sample of 71 commodity exporters among emerging and developing economies, it shows that negative shocks to commodity prices tend to weaken the financial sector, with larger shocks having more pronounced impacts. More specifically, negative commodity price shocks are associated with higher non-performing loans, bank costs and banking crises, while they reduce bank profits, liquidity, and provisions to nonperforming loans. These adverse effects tend to occur in countries with poor quality of governance, weak fiscal space, as well as those that do not have a sovereign wealth fund, do not implement macro-prudential policies and do not have a diversified export base. These findings are robust to a battery of robustness checks.
Book Synopsis Essays on Commodity Prices and Economic Activity in a Resource Rich Country by : Eugenio Maria Paulo
Download or read book Essays on Commodity Prices and Economic Activity in a Resource Rich Country written by Eugenio Maria Paulo and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The increase in commodity prices that has taken place in the past decade or so has resulted in renewed interest in the debate about the macroeconomic consequences of such price increase. Previous studies tend to assume that all commodity price shocks are alike and advocate a "one size fit all" policy response by monetary authorities, either by means of contractionary monetary policy to alleviate inflationary pressures or doing nothing, since these shocks are believed to have insignificant economic impact. This dissertation analyses the impact of fluctuations in commodity prices on the South African economy. The first chapter studies the impact of shocks to prices of four commodities on monetary policy variables. Results show that shocks to different commodity prices have different effects on the monetary policy variables, hence rejecting the "one size fits all" policy response by monetary authorities, as some researchers have suggested. Chapter two investigates the sectorial effects of commodity price shocks. The Dutch Disease hypothesis suggests that a boom in the natural resource sector shrinks the manufacturing sector through crowding out and appreciation of the real exchange rate. South Africa is a major exporter of a large number of commodities. Using a structural VAR framework this chapter analyzes the impact of shocks to different commodity prices on the production and employment levels in the manufacturing and mining sectors in South Africa. The results show that the commodity price boom has had a positive impact on both sectors, hence the manufacturing sector did not experience signs of the Dutch disease. Chapter three examines the volatility transmission between commodity prices and nominal exchange rate in South Africa. This chapter uses conditional and realized volatility models to estimate volatility in exchange rate, gold, platinum, oil, palladium and silver prices and then employs Granger-causality, Impulse Response analysis, Variance Decomposition and Ordinary Least Squares to analyze the volatility transmission from the commodity prices to the nominal exchange rate. The results show that there is volatility transmission from commodity prices to the nominal exchange rate, hence knowing the volatility in commodity prices would improve investor's ability to manage risk in South Africa.
Book Synopsis Empirical Essays in Natural Resources, Commodity Prices, and Applied Macroeconomics by : Farzaneh Davarzani
Download or read book Empirical Essays in Natural Resources, Commodity Prices, and Applied Macroeconomics written by Farzaneh Davarzani and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis presents three distinct chapters that look at different challenges faced by advanced and emerging market economies. Given the issues explored in these chapters, I contribute to several strands of economic literature. Yet, each chapter is motivated by its policy relevance and is embedded in the issues advanced and emerging market countries face. Chapter 1 explores the impact of income inequality on domestic investment in resource-rich countries. Income inequality may affect investment through different mechanisms. For instance, it could distort incentives for domestic investment; high-income inequality may discourage investment in public goods since low-income non-investors may benefit more from the returns on investment. As a result, countries with higher income inequality are expected to contribute less to their domestic investment. To investigate the relationship between income inequality and domestic investment, I use the data for 57 resource-rich countries from 1982-2015. Due to endogenous relationships among variables, I use generalized method-of moments estimators that employ lagged regressors as instruments in the estimation. Using a variety of income inequality measures, I find a negative and significant relationship between these two economic indicators: income inequality and domestic investment. This result could help resource-rich countries achieve higher growth from their resource endowments. The second chapter studies the extent to which worldwide shocks can explain country-specific inflation fluctuations. My benchmark model proxy world shocks with shocks to commodity prices. First, using a factor model of commodity prices, I extract three leading factors characterizing their co-movement. Then, I use the commodity price factors in a structural vector autoregressive model to investigate the fraction of inflation fluctuations that commodity price shocks can explain. My estimation is based on the data for 67 advanced and emerging market economies from 1970-2014. Furthermore, I examine the impact of world shocks on inflation through additional mechanisms, such as changes in the world interest rate and the global economic activity index. Compared to the previous literature, I find the increased importance of world shocks in explaining country-specific inflation fluctuations. This result can guide policymakers in setting the relevant monetary policy to control or prevent inflationary pressures in an economy. Finally, the third chapter studies whether commodity price shocks matter for estimating the output gap. First, I apply the Beveridge and Nelson decomposition method and calculate the share explained by world shocks in the variance decomposition of the output gap. In my analysis, world shocks affect the output gap through commodity price indices and global economic factors. My study includes five advanced and ten emerging market economies from 1980-2018. Then, I investigate whether commodity price shocks can improve the accuracy of this estimation. To do this, I exclude commodity price indices from my model to estimate the output gap. Finally, I use output gaps estimated with and without commodity price indices in an inflation forecasting model to compare the forecast errors of predicted inflation. Using a forecast error test, I find that the estimated output gap using commodity price indices would provide better results in forecasting inflation than other output measures.
Book Synopsis Essays on the Real Effects of Monetary Shocks in Closed and Open Economies by : Scott Leonard Baier
Download or read book Essays on the Real Effects of Monetary Shocks in Closed and Open Economies written by Scott Leonard Baier and published by . This book was released on 1996 with total page 462 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Commodity Prices and Global Stock Volatility Shocks by : Wensheng Kang
Download or read book Global Commodity Prices and Global Stock Volatility Shocks written by Wensheng Kang and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on International Economics by : Alvaro Nicolas Boitier
Download or read book Essays on International Economics written by Alvaro Nicolas Boitier and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I present three essays on International Economics that investigate the impact of heterogeneity on the transmission of foreign shocks. The dissertation consists of three chapters. In Chapters 1 and 2, I collaborate with Brian Pustilnik to explore how firms' use of supply contracts can influence the propagation of commodity price shocks to aggregate variables. Specifically, I examine purchase obligations, which are contracts that entail fixed prices for the future delivery of goods. In Chapter 1, I rely a novel dataset to highlight two empirical findings. Firstly, I show that firms utilizing these contracts experience a substantial reduction in exposure to commodity price risk, with estimates suggesting adecrease of approximately 27% compared to non-users. Secondly, I observe that sector output and labor compensation exhibit a weaker negative correlation with commodity prices when firms engage in larger contracts. Moving on to Chapter 2, I evaluate the overall quantitative significance of these contracts by introducing and calibrating a tractable general equilibrium model. By constructing a counterfactual scenario where firms are unable to trade these contracts, I assess the contribution of purchase obligations in mitigating the aggregate transmission of commodity price shocks. The results demonstrate that when firms engage in purchase obligations, the relative response of real consumption to a 10% commodity price shock is reduced by approximately 4%. Chapter 3 shifts the focus to consumer heterogeneity and nominal rigidities. Specifically, I investigate the influence of consumer access to financial markets and price stickiness from the firm's perspective. These sources of heterogeneity can significantly alter the propagation of shocks and policy changes. The chapter provides a comprehensive survey of the current literature and explores the effects of policy changes using a stylized model. I examine the impact of nominal depreciation and wealth transfers. The findings reveal that currency depreciation has an expansionary effect, although the lack of access to financial markets may dampen its impact. On the other hand, wealth transfers reduce income inequality but could potentially trigger an economic recession when consumers benefiting from the transfer supply less labor.
Book Synopsis Three Essays in International Economics by : Aleksandra Babii
Download or read book Three Essays in International Economics written by Aleksandra Babii and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis consists of three independent chapters on international macroeconomics. Little is known about the economic source of common variation in nominal exchange rates. The first chapter examines how international trade links nominal exchange rates. First, I document that two countries that trade more intensively with each other have more correlated exchange rates against the U.S dollar. Second, I develop a general equilibrium multi-country model, where a shock to a single country propagates to the exchange rates of its trading partners and serves as a source of common variation. In the baseline three-country model, I show that the sign and the strength of correlation between exchange rates depend on the elasticities of trade balances of countries with respect to both exchange rates. As a result, the model's prediction about the relationship between bilateral trade intensity and exchange rates correlation depends on the currency in which international prices are set. Lastly, an augmented model is calibrated to twelve countries to quantitatively assess the importance of trade linkages. I find that trade linkages alone, with uncorrelated shocks across countries, account for 50% of the empirical trade-exchange-rates-correlation slope coefficient. The second chapter, written in collaboration with Hussein Bidawi, shows that exchange rates of a large and heterogeneous set of countries are connected to individual commodity prices. This overturns the exchange rate disconnect puzzle: the empirical fact that nominal exchange rates are not linked to their fundamentals. Importantly, the connection between exchange rates and commodity prices is independent of the country's reliance on export of commodities. Strikingly then, the observed link is not restricted to commodity currencies. A novel empirical regularity about the link between exchange rates and commodity prices is uncovered. In particular, the strength of connectedness exhibits important time variation: commodity prices and exchange rates are more linked in times of high uncertainty on financial markets as measured by VIX. Our findings emphasize the need to study exchange rates and commodity prices beyond the traditional trade framework. In the third chapter in collaboration with Thomas Helbling, we study the effect of commodity price variation on the Australian economy. The Australian economy depends significantly on its commodity-exporting activity. The mining boom and bust over the past decade or so have had a large impact on the economy even though the mining sector is relatively small in terms of value added and employment. This paper explores the amplification of mining shocks over the input-output linkages. In particular, we focus on industries that provide inputs to the mining sector. We analyze the effect of Australia's key commodities prices between 2006 and 2016 exploiting cross-industry variation in sales exposure to the mining sector and quantify the overall output and employment effects of these shocks. We find that a one-standard-deviation decline in individual prices for some commodities decreases total employment by 0.75-0.82% and real output by 0.8%.
Book Synopsis Essays on Public Policies of Food Crises and Exports Upgrading in Developing Countries by : Carine Meyimdjui
Download or read book Essays on Public Policies of Food Crises and Exports Upgrading in Developing Countries written by Carine Meyimdjui and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent surges in food commodity prices have drawn attention on one of most severe sources of vulnerability for developing countries. In addition to financial constraints that these countries already face, (among these, the lack of insurance system to weather external shocks), their households also spend an outsized portion of their budgets on food consumption. Consequently, they experienced substantial increase in their import bills in the wake of surges in food prices. This thesis presents several essays that examine on one hand the public policies taken in response to import food shocks. On the other hand, since trade-related policies as well as exports concentration may also heighten countries' vulnerability, relevant aspects of international trade are also discussed.The first half of this dissertation examines the link between import food price shocks and fiscal policy. Essay 1 describes the effect of food price shocks on governments' expenditure structure, while Essays 2 and 3 turn to how governments' use of discretionary fiscal policy and fiscal stimulus during food price shocks affect household consumption and socio-political instability.The second half of the thesis consists of two essays addressing agricultural price distortion and exports upgrading. Essay 4 lays out the impact of climatic variability on agricultural price distortions, while essay 5 focuses on how exports concentration and exports quality upgrading impact household consumption volatility.
Book Synopsis The Effects on Growth of Commodity Price Uncertainty and Shocks by : Jan Dehn
Download or read book The Effects on Growth of Commodity Price Uncertainty and Shocks written by Jan Dehn and published by . This book was released on 2016 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity export dependency confers ex post shocks and ex ante uncertainty upon producing countries. What reduces growth is not the prospect of volatile world prices, but the actual realization of negative shocks.Dehn estimates the effects on growth of commodity price shocks and uncertainty within an established empirical growth model. Ex post shocks and ex ante uncertainty have been treated in the empirical literature as if they were synonymous. But they are distinct concepts and it is both theoretically and empirically inappropriate to treat them as synonymous.He shows that the interaction between policy and aid is robust to the inclusion of variables capturing commodity price movements. More important, his approach departs in three ways from earlier empirical studies of the subject:- It deals with issues of endogeneity without incurring an excessive loss of efficiency.- It defines the dependent variable to allow an assessment of the longer-term implications of temporary trade shocks.- It imposes no priors on how commodity price movements affect growth, but compares and contrasts a range of competing shock and uncertainty specifications.Dehn resolves the disagreement about the long-run effect of positive shocks on growth, finding that positive shocks have no long-run impact on growth (that windfalls from trade shocks do not translate into sustainable increases in income).He shows that negative shocks have large, highly significant, and negative effects on growth, but that commodity price uncertainty does not affect growth.This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to analyze the impact of commodity price risks on developing economies. The author may be contacted at [email protected].
Book Synopsis The Effects on Growth of Commodity Price Uncertainty and Shocks by : Dehn
Download or read book The Effects on Growth of Commodity Price Uncertainty and Shocks written by Dehn and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Commodity Prices Shocks and the Balance Sheet Effect in Latin America by : Alejandro Torres
Download or read book Commodity Prices Shocks and the Balance Sheet Effect in Latin America written by Alejandro Torres and published by . This book was released on 2018 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging market economies(EMEs), particularly the commodity exporterones,are exposed to world's dynamics through different channels. In this paper,we consider the role of (exogenous) commodity prices shocks in explaining business cycles in EMEs,by proposing a financial transmission mechanism: the balance sheet effect. Our hypothesis is that a negative commodity price shock increases the firm's external debt and the cost of the new debt. In consequence,the aggregate investment decreases amplifying the output contraction.To test it,we estimate a series of VAR models using quarterly data on corporate external debt, nominal exchange rate, EMBI spreads, the local currency value of external debt to nominal GDP ratio and real GDP,covering the period 2000-2017. We do this for Latin America and then, we focus on five particular economies: Brazil, Chile, Colombia, Mexico and Peru. We find that balance sheets do matter and they exacerbate the output's contraction when the commodity price shock is negative. We also find that, turning the financial channel off, the real GDP cumulative response in Latin America is smaller than in the unrestricted model. Finally, we find no evidence on the existence of the balance sheet effect for Chile.
Book Synopsis The Distributional Implications of the Impact of Fuel Price Increases on Inflation by : Mr. Kangni R Kpodar
Download or read book The Distributional Implications of the Impact of Fuel Price Increases on Inflation written by Mr. Kangni R Kpodar and published by International Monetary Fund. This book was released on 2021-11-12 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the response of consumer price inflation to changes in domestic fuel prices, looking at the different categories of the overall consumer price index (CPI). We then combine household survey data with the CPI components to construct a CPI index for the poorest and richest income quintiles with the view to assess the distributional impact of the pass-through. To undertake this analysis, the paper provides an update to the Global Monthly Retail Fuel Price Database, expanding the product coverage to premium and regular fuels, the time dimension to December 2020, and the sample to 190 countries. Three key findings stand out. First, the response of inflation to gasoline price shocks is smaller, but more persistent and broad-based in developing economies than in advanced economies. Second, we show that past studies using crude oil prices instead of retail fuel prices to estimate the pass-through to inflation significantly underestimate it. Third, while the purchasing power of all households declines as fuel prices increase, the distributional impact is progressive. But the progressivity phases out within 6 months after the shock in advanced economies, whereas it persists beyond a year in developing countries.
Book Synopsis Is Exchange Rate Stabilization an Appropriate Cure for the Dutch Disease? by : Mr.Ruy Lama
Download or read book Is Exchange Rate Stabilization an Appropriate Cure for the Dutch Disease? written by Mr.Ruy Lama and published by International Monetary Fund. This book was released on 2010-08-01 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates how successful is a policy of exchange rate stabilization to counteract the negative effects of a Dutch Disease episode. We consider a small open economy model that incorporates nominal rigidities and a learning-by-doing externality in the tradable sector. The paper shows that leaning against an appreciated exchange rate can prevent an inefficient loss of tradable output but at the cost of generating a misallocation of resources in other sectors of the economy. The paper also finds that welfare is a decreasing function of exchange rate intervention. These results suggest that stabilizing the nominal exchange rate in response to a Dutch Disease episode is highly distortionary.
Book Synopsis Essays in Applied Economics by : Kunyu Wang
Download or read book Essays in Applied Economics written by Kunyu Wang and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 --Does the party of government influence the amount and type of inward foreign investment? The results of a number of correlational studies provide inconsistent evidence. However none of these studies - for any level of government or any jurisdiction - have used methods that allow them to speak to causal effects. Regression discontinuity (RD) method is applied to a set of narrow-margin US gubernatorial elections. Over the course of a four-year term the election of a Republican governor causes a 21% boost in the growth of manufacturing-oriented FDI stock, compared to a Democrat. This effect is robust to a series of challenges. However, the same approach provides no evidence that partisanship matters for the overall level of FDI. Chapter 2 --Does an economic shock open a window of opportunity for reform, and if it does, how does the institution of a state play a role? The paper investigates how economic shocks affect the structural reforms in various institutions. This paper addresses this issue by using the exogenous variation in the international price of large commodity goods to generate the exogenous change in national income. The analysis relies on a unique mapping between new annual data from 1962 to 2005 on economic shocks from commodity prices and structural reforms in 111 countries. I find significant heterogeneous effects across sectors in autocratic countries. In autocracies, positive economic shocks promote reforms in real sectors, but deter reforms in financial sectors. However the impact of economic shocks on structural reform in democratic countries is nil. Chapter 3 --The deregulation of branch banking across the United States substantially increased the availability of credit to existing borrowers and others who has previously been excluded. Exploiting the staggered timing of changes across states for identification it is estimated that deregulation caused a 3.3% increase in rates of suicide and a 4.7% increase in rates of divorce. This is consistent with a large body of evidence linking excess debt to various measures of individual and relationship distress. Results are in most cases statistically significant at levels much higher than 1%, and prove resilient in a battery of robustness checks and falsification exercises.
Book Synopsis Commodities in Crisis by : Alfred Maizels
Download or read book Commodities in Crisis written by Alfred Maizels and published by Oxford University Press, USA. This book was released on 1992 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the dramatic changes in the global political scene, many developing countries are re-evaluating their economic and political priorities. This reappraisal scrutinizes their dependence on specific commodities and the crisis into which this market has been thrown in the last decade. This work relates the main theoretical and empirical issues in the collapse in commodity prices since 1980--a major cause of the Third World economic crises--to perceived conflicts of interest between developed and developing countries. Maizels continues his study by discussing the elements of a new approach to an effective commodity policy for the future. He includes coverage of such major problems as the impact of commodity instability on the global economy, market structure, as well as synthetics and diversification. This study will be of interest to academics and students of development economics and international trade as well as to policymakers in developing countries.
