2017 AFDI-A.Terada-Hagiwara-Fiscal Management in Resource Rich Economies


This lecture sheds light on Asia's growing demand for commodities and factors affecting economic performance of commodity dependent economies. First, commodity price cycles in the past decade have synchronized, taking in oil, metals, and many agricultural products. While supply shocks such as bad harvests account for commodity price spikes, they do not explain why such a broad range of prices have moved nearly in unison. This suggests that the commodity boom–bust cycle has a strong demand element. The lecture discusses to what extent demand from developing Asian economies—particularly larger economies like the PRC and India—affect global commodity price trends. Second, while most countries in the region welcome lower commodity prices, as low prices would help contain inflation, commodity exporters naturally have a different perspective. Countries that depend on commodity exports for foreign exchange and government revenues can suffer significant macroeconomic shocks from volatile or excessively low prices. This is particularly true for countries that rely on extracted natural resources such as petroleum, metals, and minerals. The lecture looks more closely at these economies to examine the factors that help some resource-dependent economies cope with these shocks better than others.

Document Type



Economics, Finance Sector Development