Mongolia economic recovery rests on shaky foundations

2017 ◽  
Keyword(s):  
Sovereign Debt ◽  
Iron Ore ◽  
Credit Rating ◽  
Commodity Prices ◽  
Commodity Price ◽  
Price Shocks ◽  
Content Type ◽  
The Past ◽  
Commodity Price Shocks ◽  
Bail Out

Subject The outlook for Mongolia's economy. Significance Rising commodity prices in 2016 allowed Mongolia to eke out 1% GDP growth. Over-dependence on the mining sector produced a plunge in growth over the past two years, due to a mixture of falling commodity prices (especially coal, copper and iron ore) and populist policies. The IMF in February granted Mongolia a 5.5-billion-dollar bail-out package amid concerns the country would default on its sovereign debt. Foreign investment -- once bountiful and rapidly growing -- almost disappeared, with only a slight uptick this year. The Mongolian currency has plunged over 20% against the dollar over the past year and the government's credit rating is at junk status (below a B rating by all three of the main ratings agencies). Impacts Mining will be the pillar of Mongolia's economy for the foreseeable future. It may be possible to reduce the country's exposure to commodity price shocks through diversification. Mongolia may be able to turn its location to its advantage as a transport route between China and Russia.

scholarly journals Breaks, trends and unit roots in commodity prices: a robust investigation

2014 ◽  
Vol 18 (1) ◽  
Author(s):  
Atanu Ghoshray ◽  
Mohitosh Kejriwal ◽  
Mark Wohar
Keyword(s):  
Unit Root ◽  
Structural Breaks ◽  
Commodity Prices ◽  
Unit Roots ◽  
Commodity Price ◽  
Policy Implications ◽  
Price Shocks ◽  
Price Series ◽  
Commodity Price Shocks ◽  
Trend Breaks

AbstractThis paper empirically examines the time series behavior of primary commodity prices relative to manufactures with reference to the nature of their underlying trends and the persistence of shocks driving the price processes. The direction and magnitude of the trends are assessed employing a set of econometric techniques that is robust to the nature of persistence in the commodity price shocks, thereby obviating the need for unit root pretesting. Specifically, the methods allow consistent estimation of the number and location of structural breaks in the trend function as well as facilitate the distinction between trend breaks and pure level shifts. Further, a new set of powerful unit root tests is applied to determine whether the underlying commodity price series can be characterized as difference or trend stationary processes. These tests treat breaks under the unit root null and the trend stationary alternative in a symmetric fashion thereby alleviating the procedures from spurious rejection problems and low power issues that plague most existing procedures. Relative to the extant literature, we find more evidence in favor of trend stationarity suggesting that real commodity price shocks are primarily of a transitory nature. We conclude with a discussion of the policy implications of our results.

Managing Global Growth Risks and Commodity Price Shocks - Vulnerabilities and Policy Challenges for Low-Income Countries

Policy Papers ◽  
2011 ◽  
Vol 11 (76) ◽  
Author(s):  
Keyword(s):  
Low Income ◽  
Commodity Prices ◽  
Commodity Price ◽  
Analytical Framework ◽  
Low Income Countries ◽  
Price Shocks ◽  
Commodity Price Shocks ◽  
The Face ◽  
Global Growth

As part of its work to help low-income countries (LICs) manage volatility, the IMF has recently developed an analytical framework to assess vulnerabilities and emerging risks that arise from changes in the external environment (see IMF, 2011a). This report draws on the results of the first Vulnerability Exercise for LICs (VE-LIC) conducted by IMF staff using this new framework. The report focuses on the risks of a downturn in global growth and of further global commodity price shocks, and discusses related policy challenges. The report is organized as follows: Chapter I reviews recent macroeconomic developments, including the spike in global commodity prices earlier this year. Chapter II assesses current risks and vulnerabilities, including how a sharp downturn in global growth and further commodity price shocks would affect LICs. Chapter III discusses policy challenges in the face of these risks and vulnerabilities.

The opportunity cost of intrastate violence and the out-of-sample validity of commodity price shocks

2019 ◽  
Vol 17 (3) ◽  
pp. 309-324
Author(s):  
Spencer Dorsey
Keyword(s):  
Opportunity Cost ◽  
Academic Research ◽  
Commodity Prices ◽  
Commodity Price ◽  
Science Literature ◽  
Price Shocks ◽  
Policy Makers ◽  
Aggregated Data ◽  
Commodity Price Shocks ◽  
Out Of Sample

Recent work in economics and political science has identified a positive correlation between commodity prices and violence—which are theoretically linked through an opportunity cost mechanism. The findings have important implications for the academic understanding of violence and for policy makers working to anticipate and prevent it. Despite the importance of the findings, they are based on in-sample validation and aggressively aggregated data. There is a growing understanding, both within this literature and in the broader social science literature, that out-of-sample validation should be considered essential before any policy recommendations are made based on academic research. I find that while coffee price shocks are still correlated with intrastate violence in a higher resolution test (district-month), they fail to be useful out-of-sample. These results should prompt a reevaluation of scholarly work based on the relationship between commodity prices and violence and of any policies that have been crafted based on it.

How do financially vulnerable farms finance debt in periods of falling prices?

2018 ◽  
Vol 78 (4) ◽  
pp. 412-424 ◽  
Author(s):  
Daniel L. Prager ◽  
Christopher B. Burns ◽  
Noah J. Miller
Keyword(s):  
Panel Data ◽  
Real Estate ◽  
Commodity Prices ◽  
Financial Stress ◽  
Commodity Price ◽  
Seemingly Unrelated Regression ◽  
Content Type ◽  
Commodity Price Shocks ◽  
Farm Debt ◽  
Interest Payments

Purpose The purpose of this paper is to examine the effect of falling commodity prices on farm debt usage of corn and soybean farms, and how this debt usage differs based on the financial leverage of the farm. Design/methodology/approach Using panel data on farms surveyed at least twice in the Agricultural Resource Management Survey (ARMS) from 1996 to 2015, this paper uses a difference-in-differences approach to measure the effect of low commodity price shocks on financially vulnerable farms. To account for the correlation in the error structure between the three dependent variables (real estate debt, non-real estate debt, and interest payments) we use a seemingly unrelated regression approach. Findings Following a commodity price shock, financially vulnerable farms (debt-to-asset ratio greater than 40 percent) were found to increase their non-real estate debt when compared with non-financially vulnerable farms. Off-farm business income was found to help farms reduce real estate debt and interest payments in the face of these shocks. Research limitations/implications Data consist of corn and soybean farms surveyed more than once in the ARMS from 1996 to 2015 and are not representative of all US farms, but have similar characteristics to US commercial farms. Social implications The results indicate that financially vulnerable commercial crop farms respond to lower prices by taking on non-real estate debt, increasing financial stress. Well-targeted federal programs could prevent further financial stress for this group. Originality/value This is the first paper to use unbalanced panel data from ARMS to examine how farm debt use responds to commodity prices. This paper can inform policymakers about the financial risks to farms resulting from the current low-price environment.

scholarly journals Food and Energy Price Shocks: What Other Prices Are Affected?

2011 ◽  
pp. 1-6
Author(s):  
Todd E. Clark ◽  
Saeed Zaman
Keyword(s):  
Commodity Prices ◽  
Commodity Price ◽  
Energy Price ◽  
Price Shocks ◽  
Price Increases ◽  
Consumer Prices ◽  
Commodity Price Shocks

Sharp rises in energy and other commodity prices have recently ignited concerns about inflation. Will these price increases spill over to other prices more generally? We study the typical responses of different price shocks and assess whether the recent behavior of producer and consumer prices is consistent with historical norms. Our analysis shows that the behavior of various producer and consumer prices since late 2009 has generally matched up with historical patterns. Overall, our findings suggest that effects of the recent energy and commodity price shocks on core consumer prices will be modest going forward.

scholarly journals Decomposing the Inflation Dynamics in the Philippines

2019 ◽  
Vol 19 (153) ◽  
Author(s):  
Si Guo ◽  
Philippe Karam ◽  
Jan Vlcek
Keyword(s):  
Monetary Policy ◽  
Structural Model ◽  
Commodity Prices ◽  
Commodity Price ◽  
The Philippines ◽  
Price Shocks ◽  
Important Indicator ◽  
Demand And Supply ◽  
Inflation Rates ◽  
Commodity Price Shocks

Inflation rates rose sharply in the Philippines during 2018. Understanding the demand and supply sources of inflation pressures is key to monetary policy response. Qualitatively, indicators have pointed to evidence of inflation pressures from both sides in 2018, with the supply factors, by and large, associated with commodity-price shocks and demand factors deduced from gleaning at the wider non-oil trade deficits seen in the Philippines. Quantitatively, we deploy a semi-structural model to decompose the contributions of various shocks to inflation. Our main findings are (1) supply factors (mainly global commodity prices) played a prominent role in explaining the rise in inflation in 2018; (2) demand factors also contributed to inflation in a non-negligible way, justifying the need for tighter monetary policy in 2018; (3) the size of the estimated output gap (an important indicator of demand pressures) could be larger, when considering the widening trade deficits in 2018; and (4) a delayed monetary policy tightening can be costly in terms of higher inflation rates, requiring larger and more aggressive interest rate hikes to bring inflation under control, based on a counterfactual exercise.

scholarly journals Rising Global Inflation and Consumer Prices in the People's Republic of China

2021 ◽  
Author(s):  
Keyword(s):  
Commodity Prices ◽  
Commodity Price ◽  
Inflation Expectations ◽  
People's Republic Of China ◽  
Price Shocks ◽  
Price Inflation ◽  
Republic Of China ◽  
Transmission Channels ◽  
Consumer Prices ◽  
Commodity Price Shocks

Although global inflation and commodity prices are on the rise, spillovers to consumer price inflation in the People’s Republic of China (PRC) are expected to be limited. Consumer price inflation in the PRC has been driven mainly by domestic factors during the past decade, while commodity price shocks that led to higher producer costs hardly affected consumer prices. Reasons for these developments include a consumer basket of domestic products, anchored inflation expectations, and system buffers to absorb commodity price shocks. Though contagion risks of higher global inflation and commodity prices to inflation seem limited, possible transmission channels include further rising commodity prices and a shift in inflation expectations in the PRC. This note aims at providing policy recommendations on minimizing inflation transmission channels and containing inflationary expectations.

scholarly journals Do Commodity Prices Signal Inflation?

2011 ◽  
pp. 1-4
Author(s):  
Owen F. Humpage
Keyword(s):  
Supply And Demand ◽  
Commodity Prices ◽  
Commodity Price ◽  
Central Banks ◽  
Commodity Markets ◽  
Price Shocks ◽  
The Public ◽  
Commodity Price Shocks ◽  
The Difference

Do the rising commodity prices we have seen in recent years reflect basic supply-and-demand developments in various commodity markets, or are they the first signs of inflation? In practice, it’s not always easy to tell the difference—for the public or policymakers—but fundamentally different they are. Central banks can do nothing about relative commodity-price pressures, since central banks do not produce commodities. Likewise, commodity-price shocks do not impair the ability of central banks to control inflation in principle, but they can greatly complicate the task.

Parties hold key to Africa stability, reform prospects

2015 ◽  
Keyword(s):  
Political Parties ◽  
Commodity Price ◽  
Price Shocks ◽  
Important Indicator ◽  
Content Type ◽  
Price Shock ◽  
Commodity Price Shocks ◽  
Multiple Elections ◽  
Sub Saharan ◽  
Ruling Party

Subject Effect of political parties on reform and stability in Africa. Significance Despite Nigeria's historic election, the broad continental trend is that the future of many sub-Saharan African (SSA) states lies with ruling parties, not opposition politics. The convergence of multiple elections in 2015-16 along with commodity price shocks are bringing many ruling party regimes to a critical juncture. The structure of these regimes are an important indicator for the prospects for reforms and stability. Impacts Narrow-based ruling parties in oil rich states are being forced to rationalise patronage networks to deal with the price shock. The broad character of Ghana's ruling and opposition parties means that both would face obstacles implementing IMF reforms. South Africa's opposition Democratic Alliance finds it hard to set clear policies while growing its base and attracting coalition partners.

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