Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339256 
Year of Publication: 
2026
Series/Report no.: 
WIDER Working Paper No. 24/26
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Commodity-exporting economies, such as South Africa, are susceptible to wide fluctuations in their business cycles, closely tied to commodity price fluctuations. In this research, we develop a prototype dynamic stochastic general equilibrium (DSGE) model with specific features for emerging small open commodity-exporting economies, together with investigating the implications for monetary and fiscal policies following a commodity price shock. This framework allows us to contribute to an explanation of the evolution of the macroeconomy over time following commodity price shocks, and how these are tied to macroeconomic policies. The results show that the structure of the economy and nominal rigidities, together with the wealth and borrowing cost effects to a commodity price shock can influence fiscal standing and inflation. More precisely, following a booming commodity price shock, taxes and government spending increase, and to the extent that the borrowing cost term of the country falls, higher consumption demand can generate inflationary pressures.
Subjects: 
emerging markets
commodity price shocks
monetary policy
fiscus
DSGE model
JEL: 
E31
E63
O11
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-700-8
Document Type: 
Working Paper

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