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The Adjustment to Commodity Price Shocks in Chile, Colombia, and Peru
Author:
Mr. Francisco Roch null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 208
Language:
English
Publication Date:
29 Sep 2017
DOI:
https://doi.org/10.5089/9781484320648.001
ISBN:
9781484320648
ISSN:
1018-5941
Pages:
25
Keywords:
WP; commodity price; commodity; Chile; Peru; Commodity Prices; Fiscal Policy; Flexible Exchange Rates; Colombia; Peru t; commodity exporters' emerging economies; oil price decline; large commodity price shock; shock to commodity price; country-specific commodity price index; propagation mechanism of commodity price shock; contribution of commodity price; effects of commodity-price fluctuation; Colombia t; adjustment to commodity price; Commodity price shocks; Current account; Technology transfer; Current account deficits; Sub-Saharan Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper presents a comparative analysis of the macroeconomic adjustment in Chile, Colombia, and Peru to commodity terms-of-trade shocks. The study is done in two steps: (i) an analysis of the impulse responses of key macroeconomic variables to terms-of-trade shocks and (ii) an event study of the adjustment to the recent decline in commodity prices. The experiences of these countries highlight the importance of flexible exchange rates to help with the adjustment to lower commodity prices, and staying vigilant in addressing depreciation pressures on inflation through tightening monetary policies. On the fiscal front, evidence shows that greater fiscal space, like in Chile and Peru, gives more room for accommodating terms-of-trade shocks.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund