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Commodity Prices, Financial Frictions, and Macroprudential Policies

Author

Listed:
  • Shigeto Kitano

    (Research Institute for Economics and Business Administration (RIEB), Kobe University, JAPAN)

  • Kenya Takaku

    (Faculty of International Studies, Hiroshima City University, JAPAN)

Abstract

Fluctuations in commodity prices have significant effects on output and financial stability in emerging countries. We examine the effect of macroprudential policies on commodity-exporting countries, which consist of two sectors---the commodity-producing sector and final goods sector. When a commodity-exporting country suffers from volatile fluctuations in commodity prices, we find that macroprudential policy in each sector is welfare-enhancing and that it is optimal to impose macroprudential policies in both sectors. We also show that macroprudential policies are more effective in improving welfare for commodity-exporting economies suffering from a stronger link between commodity prices and interest rate spreads, higher sensitivity of interest spreads to debt, and larger commodity price shocks.

Suggested Citation

  • Shigeto Kitano & Kenya Takaku, 2023. "Commodity Prices, Financial Frictions, and Macroprudential Policies," Discussion Paper Series DP2023-21, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2023-21
    as

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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2023-21.pdf
    File Function: First version, 2023
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Macroprudential policies; Commodity-exporting countries; DSGE model; Financial frictions; Emerging economies; Mongolia;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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