The Effects of Commodity Price Shocks on Fiscal Aggregates in Latin America

Medina, Leandro

doi:10.1057/imfer.2016.14

Cited by 18 publications

(17 citation statements)

References 25 publications

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“…Cespedes and Velasco (2014) find that fiscal policy tended to be more countercyclical in the recent commodity price boom, due to the presence of fiscal rules. Medina (2016) shows that government expenditures in countries with fiscal rules respond less to shocks to commodity prices. Lopez-Martin, Leal, and Fritscher (2017) present a model of sovereign default that illustrates the mechanism behind the positive correlation of commodity revenues with government spending and a negative correlation with tax rates.…”

Section: Related Literaturementioning

confidence: 99%

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The adjustment to commodity price shocks

Roch

2019

Journal of Applied Economics

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This paper analyzes the macroeconomic adjustment in commodityexporting countries to commodity price shocks. First, I estimate a heterogenous panel SVAR using data from 22 commodityexporting economies spanning the period 1980-2017. I find that commodity terms of trade shocks are an important driver of business-cycle fluctuations: they explain around 30 percent of movements in output, contrary to the 10 percent found in recent studies. However, there is wide variation in the responses to a commodity terms of trade innovation across countries. Second, I use panel SVARs to study the role of various key country characteristics and economic policies in the macroeconomic response to these shocks. I find evidence that exchange rate flexibility, inflation targeting regimes and fiscal rules help insulate the economy from commodity price movements.

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Section: Related Literaturementioning

confidence: 99%

“…For this reason, I cannot use the heterogeneous SVAR approach in Pedroni (2013). Instead, I follow the methodology in Medina (2016) who estimates a homogenous panel SVAR using system Generalized Method of Moments (GMM).…”

Section: Ctot Shocks Country Characteristics and Macro-frameworkmentioning

confidence: 99%

The adjustment to commodity price shocks

Roch

2019

Journal of Applied Economics

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“…Akanbi and Sbia (2017) find empirical evidence of the effects of fiscal policy on the current accounts of oil exporting countries. Medina (2016) study the impacts of commodity price shocks on fiscal policy indicators in Latin American and find that fiscal aggregates rise in response to positive shocks to commodity prices.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia

2017

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This paper investigates the effect of oil price shocks on government expenditures on the health and education sectors in Saudi Arabia. Using a quarterly dataset 1990Q1-2017Q2 and employing a non-linear autoregressive distributed lag (NARDL) model, our research shows evidence of a non-linear relationship between oil prices and government expenditures in Saudi Arabia, where a negative oil price shock would have a statistically significant different impact in the long run compared to a positive shock. We build upon our empirical findings and draw some policy recommendations for Vision 2030 of Saudi Arabia.

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“…8 The literature on energy price shocks and GDP movements in the United States presents alternative specifications and tests for empirically examining asymmetries (Kilian and Vigfusson, 2011). See Medina (2016) for an application in the fiscal domain.. 9 We generally use the first and second lag of the positive/negative output gap as instruments. 10 In particular, we consider a fixed set of trading partners (Canada, China, Japan, India, United States and members of the European Union), and when needed, add country-specific partners to explain at least 60 percent of a country's exports.…”

Section: Stylized Factsmentioning

confidence: 99%

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

Ardanaz¹,

Izquierdo²

2017

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 Abstract * This paper studies the cyclical properties of two key expenditure categories (current and public investment spending) during the different phases of the business cycle (good times and bad times). Anecdotal evidence suggests that policymakers usually cannot resist the temptation of spending more on current expenditure in good times, but only pick capital expenditures to adjust during bad times. The paper answers the following questions: do current and capital expenditures react to the business cycle? If so, by how much, and why? In a sample of more than 100 developing countries and 30 developed countries observed between 1980 and 2014, a new empirical regularity specific to developing countries is identified: upswings are associated with increases in current primary expenditures (e.g., wages, transfers) only, while public investment falls and current spending remains acyclical during downturns. Evidence is also presented that this asymmetrical response is more pronounced in countries where incumbent politicians face shorter time horizons and weak institutions. Other type of factors traditionally discussed in the literature (limited creditworthiness, fiscal rules, and tax base volatility) have limited explanatory power. JEL classifications: D72, E32, E62, H50

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The Effects of Commodity Price Shocks on Fiscal Aggregates in Latin America

Cited by 18 publications

References 25 publications

The adjustment to commodity price shocks

The adjustment to commodity price shocks

Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries

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The Effects of Commodity Price Shocks on Fiscal Aggregates in Latin America

Cited by 18 publications

References 25 publications

The adjustment to commodity price shocks

The adjustment to commodity price shocks

Asymmetric Impacts of Oil Price Shocks on Government Expenditures: Evidence from Saudi Arabia

Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries ﻿

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Current expenditure upswings in good times and capital expenditure downswings in bad times?: new evidence from developing countries