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Author: Mr.Damiano Sandri
Publisher: International Monetary Fund
ISBN: 145187376X
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.
Author: Mr.Damiano Sandri
Publisher: International Monetary Fund
ISBN: 145187376X
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Damiano Sandri
Publisher:
ISBN:
Category : Electronic books
Languages : en
Pages :
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Book Description
Author: Yifan Ma
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Commodity price fluctuations can exert a large impact on macroeconomic fundamentals in commodity-dependent economies. We document a large heterogeneity in country-specific commodity price, inflation, trade values and foreign exchange risks among 119 commodity exporters and importers. We propose that such diverse macroeconomic risks can be hedged using commodity futures contracts. We find that a small set of futures traded on major international exchanges are sufficient only for hedging pure commodity price risks. For many countries, the addition of contracts traded on more local national exchanges is crucial for hedging their macroeconomic risks. The hedging is more effective in countries where export/import depends less on agriculture, more on energy, and where country-specific local commodity prices correlate more with the global ones. Contrary to conventional wisdom, inflation risk can only be hedged in a relatively small number of countries.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1513582593
Category : Business & Economics
Languages : en
Pages : 53
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Book Description
Declining commodity prices during mid-2014-2016 posed significant challenges to commodity-exporting economies. The severe terms of trade shock associated with a sharp fall in world commodity prices have raised anew questions about the viability of pegged exchange rate regimes. More recently, the COVID-19 pandemic and the measures needed to contain its spread have been associated with a significant disruption in several economic sectors, in particular, travel, tourism, and hospitality industry, adding to the downward pressure on commodity prices, a sharp fall in foreign exchange earnings, and depressed economic activity in most commodity exporters. This paper reviews country experiences with different exchange rate regimes in coping with commodity price shocks and explores the role of flexible exchange rates as a shock absorber, analyzing the macroeconomic impact of adverse term-of-trade shocks under different regimes using event study and panel vector autoregression techniques. It also analyzes, conceptually and empirically, policy and technical considerations in making exchange rate regime choices and discusses the supporting policies that should accompany a given regime choice to make that choice sustainable. It offers lessons that could be helpful to the Caribbean commodity-exporters.
Author: Eduardo Borensztein
Publisher:
ISBN:
Category : Commodity futures
Languages : en
Pages : 32
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Book Description
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much larger welfare gains, amounting to several percentage points of annual consumption.
Author: Eduardo Borensztein
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
Author: Daniel Lederman
Publisher: World Bank Publications
ISBN: 0821384910
Category : Business & Economics
Languages : en
Pages : 153
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Book Description
Does what economies export matter for development? If so, can industrial policies improve on the export basket generated by the market? This book approaches these questions from a variety of conceptual and policy viewpoints. Reviewing the theoretical arguments in favor of industrial policies, the authors first ask whether existing indicators allow policy makers to identify growth-promoting sectors with confidence. To this end, they assess, and ultimately cast doubt upon, the reliability of many popular indicators advocated by proponents of industrial policy. Second, and central to their critique, the authors document extraordinary differences in the performance of countries exporting seemingly identical products, be they natural resources or 'high-tech' goods. Further, they argue that globalization has so fragmented the production process that even talking about exported goods as opposed to tasks may be misleading. Reviewing evidence from history and from around the world, the authors conclude that policy makers should focus less on what is produced, and more on how it is produced. They analyze alternative approaches to picking winners but conclude by favoring 'horizontal-ish' policies--for instance, those that build human capital or foment innovation in existing and future products—that only incidentally favor some sectors over others.
Author: Reda Cherif
Publisher: International Monetary Fund
ISBN: 1475502451
Category : Business & Economics
Languages : en
Pages : 24
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Book Description
Policymakers in oil-exporting countries confront the question of how to allocate oil revenues among consumption, saving, and investment in the face of high income volatility. We study this allocation problem in a precautionary saving and investment model under uncertainty. Consistent with data in the 2000s, precautionary saving is sizable and the marginal propensity to consume out of permanent shocks is below one, in stark contrast to the predictions of the perfect foresight model. The optimal investment rate is high if productivity in the tradable sector is high enough.
Author: Kenneth W. Clements
Publisher: Cambridge University Press
ISBN: 110701476X
Category : Business & Economics
Languages : en
Pages : 401
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Book Description
Discusses economic issues associated with exchange rates, commodity prices, the economic size of countries and alternatives to PPP exchange rates.
