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

Author: Leandro Medina

Publisher: International Monetary Fund

Published: 2010-08-01

Total Pages: 29

ISBN-13: 1455202266

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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.

Commodity Cycles, Inequality, and Poverty in Latin America
Commodity Cycles, Inequality, and Poverty in Latin America

Author: Mr. Ravi Balakrishnan

Publisher: International Monetary Fund

Published: 2021-04-26

Total Pages: 123

ISBN-13: 1484326091

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Over the past decades, inequality has risen not just in advanced economies but also in many emerging market and developing economies, becoming one of the key global policy challenges. And throughout the 20th century, Latin America was associated with some of the world’s highest levels of inequality. Yet something interesting happened in the first decade and a half of the 21st century. Latin America was the only region in the World to have experienced significant declines in inequality in that period. Poverty also fell in Latin America, although this was replicated in other regions, and Latin America started from a relatively low base. Starting around 2014, however, and even before the COVID-19 pandemic hit, poverty and inequality gains had already slowed in Latin America and, in some cases, gone into reverse. And the COVID-19 shock, which is still playing out, is likely to dramatically worsen short-term poverty and inequality dynamics. Against this background, this departmental paper investigates the link between commodity prices, and poverty and inequality developments in Latin America.

World Economic Outlook, April 2012
World Economic Outlook, April 2012

Author: International Monetary Fund. Research Dept.

Publisher: International Monetary Fund

Published: 2012-04-17

Total Pages: 299

ISBN-13: 1475507038

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The April 2012 issue of the World Economic Outlook assesses the prospects for the global economy, which has gradually strengthened after a major setback during 2011. The threat of a sharp global slowdown eased with improved activity in the United States and better policies in the euro area. Weak recovery will likely resume in the major advanced economies, and activity will remain relatively solid in most emerging and developing economies. However, recent improvements are very fragile. Policymakers must calibrate policies to support growth in the near term and must implement fundamental changes to achieve healthy growth in the medium term. Chapter 3 examines how policies directed at real estate markets can accelerate the improvement of household balance sheets and thus support otherwise anemic consumption. Chapter 4 examines how swings in commodity prices affect commodity-exporting economies, many of which have experienced a decade of good growth. With commodity prices unlikely to continue growing at the recent elevated pace, however, these economies may have to adapt their fiscal and other policies to lower potential output growth in the future.

Commodity Price Movements and Banking Crises
Commodity Price Movements and Banking Crises

Author: Mr.Markus Eberhardt

Publisher: International Monetary Fund

Published: 2018-07-06

Total Pages: 53

ISBN-13: 1484367820

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We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model. Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.

The Economy in the Time of Covid-19
The Economy in the Time of Covid-19

Author: World Bank

Publisher: World Bank Publications

Published: 2020-04-12

Total Pages: 64

ISBN-13: 1464815704

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After a period of rapid economic growth associated with high commodity prices, the region had entered a phase of lackluster performance. Recent developments, including a new oil price shock, and the outbreak of the Covid-19 epidemic will push the region into recession. Many countries are struggling to contain the spread of the Covid-19 epidemic while avoiding a dramatic decline in economic activity. The report analyzes how to think about this tradeoff. It estimates the potential health costs, assesses the effectiveness of diverse containment strategies, and discusses how large the economic cost could be. The current crisis is unprecedented because it combines a fall in global demand, tighter financial conditions and a major supply shock. The response needs to consider how to socialize the losses, how to prevent a collapse of the financial sector, how to protect jobs and livelihoods, and how to manage and divest the assets that will inevitably end up in the hands of the state.

Commodity Price Shocks and Fiscal Outcomes
Commodity Price Shocks and Fiscal Outcomes

Author: Mr.Nicola Spatafora

Publisher: International Monetary Fund

Published: 2012-05-01

Total Pages: 75

ISBN-13: 1475558872

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The experience of developing countries over 1990-2010 indicates that commodity prices have a significant impact on fiscal outcomes. Both revenue and expenditure rise in response to commodity (import or export) price increases; the response of the fiscal deficit is ambiguous. A floating exchange rate regime only partially offsets the impact; foreign-exchange reserves do not dampen the effects. Hence, there is a strong case for fiscal hedging against commodity price shocks. Hedging instruments based on a limited set of benchmark world prices for a narrow set of commodities may suffice to realize most of the potential benefits.

Structural Breaks in Fiscal Performance
Structural Breaks in Fiscal Performance

Author: Ms.Ana Corbacho

Publisher: International Monetary Fund

Published: 2010-11-01

Total Pages: 29

ISBN-13: 1455209481

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In recent years, many countries have adopted Fiscal Responsibility Laws to strengthen fiscal institutions and promote fiscal discipline in a credible, predictable and transparent manner. Still, results on the effectiveness of these laws remain tentative. In this paper, we test empirically whether fiscal performance, measured as the level of primary fiscal balances and their volatility, indeed improved after the implementation of Fiscal Responsibility Laws in a sample of Latin American and advanced economies. We show that traditional econometric approaches, which rely on the use of dummies in time series or panel regressions, yield biased estimates. In contrast, our empirical strategy recognizes that, a priori, the timing of the effect of these laws on fiscal performance is unknown, while controlling for the impact of the business and commodity cycles on fiscal outcomes. Overall, we find limited empirical evidence in support of the view that Fiscal Responsibility Laws have had a distinguishable effect on fiscal performance. However, Fiscal Responsibility Laws could still have other positive effects on the conduct of fiscal policy not analyzed here, for instance, through enhanced transparency and guidance in the budget process and lower risk premia.

Socioeconomic Shocks and Africa’s Development Agenda
Socioeconomic Shocks and Africa’s Development Agenda

Author: Evans Osabuohien

Publisher: Taylor & Francis

Published: 2022-11-10

Total Pages: 333

ISBN-13: 1000773698

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This book investigates how African countries respond to socioeconomic shocks, drawing out lessons to help to inform future policy and development efforts. The challenges posed by the COVID-19 pandemic affected all sectors of the economy, exposing substantial structural weaknesses and complexities in supply chains and logistics across the African continent. This book examines the disruptive impact of the pandemic across Africa. However, it also goes beyond the current crisis to investigate how socioeconomic pressures in general impact commodity prices, national budgeting processes, food, business, energy sectors, education, health, and sanitation. Overall, the book presents evidence-based solutions and policy recommendations to enable readers to improve resilience and responses to future crises. The insights provided by this book will be of interest to policymakers and development agencies, as well as to researchers of global development, politics, economics, business, and African studies.

Why Latin American Nations Fail
Why Latin American Nations Fail

Author: Matías Vernengo

Publisher: Univ of California Press

Published: 2017-10-03

Total Pages: 237

ISBN-13: 0520964527

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The question of development is a major topic in courses across the social sciences and history, particularly those focused on Latin America. Many scholars and instructors have tried to pinpoint, explain, and define the problem of underdevelopment in the region. With new ideas have come new strategies that by and large have failed to explain or reduce income disparity and relieve poverty in the region. Why Latin American Nations Fail brings together leading Latin Americanists from several disciplines to address the topic of how and why contemporary development strategies have failed to curb rampant poverty and underdevelopment throughout the region. Given the dramatic political turns in contemporary Latin America, this book offers a much-needed explanation and analysis of the factors that are key to making sense of development today.