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The impact of commodity price volatility on fiscal balance and the role of real interest rate

Citation

Majumder, MK and Raghavan, M and Vespignani, J, The impact of commodity price volatility on fiscal balance and the role of real interest rate, Empirical Economics pp. 1-28. ISSN 0377-7332 (2022) [Refereed Article]

Copyright Statement

The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021

DOI: doi:10.1007/s00181-021-02168-3

Abstract

This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating exchange rate regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three-times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.

Item Details

Item Type:Refereed Article
Keywords:commodity prices, commodity price volatility, fiscal balance, real interest rate, commodity prices, external debt, exchange rate regimes
Research Division:Economics
Research Group:Applied economics
Research Field:Macroeconomics (incl. monetary and fiscal theory)
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Macroeconomics not elsewhere classified
UTAS Author:Majumder, MK (Mr Monoj Majumder)
UTAS Author:Raghavan, M (Dr Mala Raghavan)
UTAS Author:Vespignani, J (Associate Professor Joaquin Vespignani)
ID Code:148701
Year Published:2022
Deposited By:Finance
Deposited On:2022-02-03
Last Modified:2022-04-22
Downloads:0

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