International Monetary Fund. Asia and Pacific Dept
increased corporate risk. Although Australia’s net commodityexportsfall, there is a rebalancing between domestic and external demand, and a rebalancing between China and Australia’s other trading partners that stimulates Australia’s exports and services sector, on net. Takeaway : Although Australia is a diversified economy, it depends on the interaction of its commodities sector with its multiple trading partners, beyond China alone.
1. China and Australia have increasingly strong linkages, especially through trade and commodity channels
Mr. Philippe D Karam, Mr. Dirk V Muir, and Mr. Thomas Helbling
prices, and increased corporate risk. Although Australia’s net commodityexportsfall, there is a rebalancing between domestic and external demand, and between China and Australia’s other trading partners, that stimulates Australia’s exports and services sector, on net.
There are four takeaways from these scenarios. The most generally applicable takeaway from all three scenarios is that while real GDP in Australia experiences only small changes, these mask much broader movements in the composition of GDP, whether it be between domestic and external demand, or
Gustavo Adler, Sebastián Sosa, and Charles F. Kramer
Diversification in emerging Asia has been even starker, with commodityexportsfalling from about 60 percent of total exports in the 1970s to less than 20 percent in 2010.
Commodity-exporting advanced economies, in turn, have a less diversified export structure than 40 years ago. In fact, after declining slightly for three decades, the share of commodity exports in total exports increased sharply in the last decade for this group of countries, reaching—on average—60 percent in 2010. Interestingly, these countries appear to be more reliant on commodities—based on our
China and Australia have increasingly strong links, especially through trade. These are driven by demand from China for Australian commodities (coal and iron ore) and services (tourism and education). These links are influenced by China’s transition to a services-driven, consumer-led economy. Using ANZIMF, the Australia-New Zealand Integrated Monetary and Fiscal model, three risks (both upside and downside) to China during this transition process are considered, focusing on their spillovers to Australia. One simple takeaway is central to each risk – while the real GDP response to shocks in Australia typically is small, responses in demand components or sectors are usually much larger– along with three further takeaways, all of which help in the analysis of Australia in relation to any risk emanating from China.
International Monetary Fund. Western Hemisphere Dept.
) have diversified away from commodities, although the latter still account, on average, for 60 percent of their total exports of goods and services. Interestingly, this diversification has not taken place in the case of the heavy metal or energy exporters (Chile, Colombia, Ecuador, Peru, and Venezuela).
In Mexico and Central America, the importance of commodity exports has also halved (from 50 percent of total exports to around 25 percent) between 1970–80 and 2010.
Diversification in emerging Asia has been even starker, with commodityexportsfalling from
Price Elasticity of Supply
Beverages and tobacco
Agricultural raw materials
One broad conclusion, gained from examining the estimates shown in Table 13 , is that income elasticities of demand for developing country commodityexportsfall in the range of 0.3 to 3.5. A further conclusion is that the demand for agricultural products
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper on Australia discusses prospects and ramifications of China’s economic transition. Australia and China have strong linkages that are growing over time as China carries on with its economic transition. Trade in commodities and services are constantly growing. Australia has established itself as a dominant player in some key Chinese import needs, particularly for steel. The stylized facts also demonstrate that the rest of Asia is increasingly important for Australia. The charts for tourism, education, and the destination of exports illustrate that both advanced and emerging Asia already have a growing impact. The paper shows that the rest of Asia’s trade linkages with Australia are similar in size to the linkages between Australia and China. China may be Australia’s largest trading partner, but the rest of Asia is also a rapidly growing region, with potential markets for Australian expansion.
Commodity-exporting countries have significantly benefited from the commodity price boom of recent years. At the current juncture, however, uncertain global economic prospects have raised questions about their vulnerability to a sharp fall in commodity prices and the policies that can shield it from such a shock. To address these questions, this paper takes a long term (4 decade) view at emerging markets' commodity dependence, the history of commodity price busts and the role of policies in mitigating or amplifying their economic impact. The paper highlights the stark difference in trends between Latin America - one of the most vulnerable regions given its high, and rising, commodity dependence - and emerging Asia - which has evolved from being a net exporter to a net importer of commodities in the last 40 years. We find evidence, however, that while commodity dependence is an important ingredient, a country's ultimate degree of vulnerability to commodity price shocks is to a great extent determined by the flexibility and quality of its policy framework. Policies in the run-up of sharp terms-of-trade drops - especially when those are preceded by booms - play a particularly important role. Limited exchange rate flexibility, a weak external position, and loose fiscal policy tend to amplify the negative effects of these shocks on domestic output. Financial dollarization also appears to act as a shock "amplifier."
This paper studies the flow of primary commodity exports from non-oil exporting developing countries grouped by geographical region. The first part analyzes the changes in the structure of developing country commodity exports that have taken place over the past two decades. The second part presents empirical evidence on the response of commodity exports to demand and supply. These empirical results point to the low price and income elasticities of demand for certain primary commodity exports and to price elasticities of supply that are in general lower than the corresponding price elasticities of demand in the short run, but that are more sensitive to price in the longer run.