Fiscal Policy, the Real Exchange Rate and Commodity Prices

20 Pages Posted: 15 Feb 2006

See all articles by Carmen Reinhart

Carmen Reinhart

Harvard University - Center for Business and Government; Centre for Economic Policy Research (CEPR); World Bank; University of Maryland - School of Public Affairs; National Bureau of Economic Research (NBER); International Monetary Fund (IMF); Peterson Institute for International Economics; Harvard University, Harvard Kennedy School (HKS), Belfer Center for Science and International Affairs (BCSIA) ; Harvard University - Harvard Kennedy School (HKS)

Date Written: October 1990

Abstract

The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.

JEL Classification: 321, 411

Suggested Citation

Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen and Reinhart, Carmen, Fiscal Policy, the Real Exchange Rate and Commodity Prices (October 1990). IMF Working Paper No. 90/91, Available at SSRN: https://ssrn.com/abstract=885051

Carmen Reinhart (Contact Author)

Harvard University - Center for Business and Government ( email )

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Harvard University - Harvard Kennedy School (HKS) ( email )

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