Commodity price shocks and the distribution of income in commodity-dependent least-developed countries |
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| Affiliation: | 1. University of Utah, Department of Economics, 260 Central Campus Drive, Orson Spencer Hall, Room 339A, Salt Lake City, UT 84112-9155, USA;2. Austrian Foundation for Development Research (ÖFSE), Sensengasse 3, 1090 Vienna, Austria;1. Liechtenstein Financial Market Authority, Landstrasse 109, P.O. Box 279, 9490 Vaduz, Liechtenstein;2. Foreign Research Division, Oesterreichische Nationalbank, Austria;1. The Center for Research on International Economics and Department of Economics, The University of Wisconsin-Milwaukee, United States;2. Department of Finance and Banking, University of Malaya, Malaysia;3. Department of Economics, Penn State University, Mont Alto, PA 17237, United States |
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| Abstract: | Many least developed countries (LDCs) face commodity dependence on the export and import side. This paper develops a structuralist computable general equilibrium model for commodity-dependent LDCs and simulates global commodity price shocks for Burkina Faso, Ethiopia and Mozambique. Results show important macroeconomic and distributional effects. Although increasing export commodity prices are beneficial, the high correlation with import commodity prices causes low or even negative combined effects. The magnitude of effects depends on the degree of import and export dependence, the production structure of the key commodity sectors and policies that determine the distribution of windfall profits. |
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| Keywords: | Economic development Primary commodities Commodity dependence Price volatility Africa |
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