| Description |
1 online resource (55 pages) |
| Series |
IMF Working Papers ; v. Working Paper No. 09/229 |
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IMF Working Papers
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| Contents |
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Stylized fact; 1. Countries with 2002-2007 average of commodity net export share of non-commodity-GDP above 10 percent; 2. Standard deviation of the detrended log of commodity exports and non-commodity GDP; 1. Average open interest and risk premium (NYMEX July 03 -- May 09); III. The model; A. No hedging; B. Futures; IV. The welfare gains from hedging; A. Calibration; 3. Benchmark calibration; 4. Calibration by commodity; B. Benchmark results; 2. Welfare gains from consumption smoothing only; 3. Full welfare gains |
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4. Consumption functions and target net foreign asset position5. Dynamics of net foreign assets and consumption following the introduction of hedging; C. Sensitivity analysis; 6. Welfare gains as a function of discount factor and growth rate; 7. Welfare gains as a function of the shock persistency; 8 Welfare gains as a function of the shock variance; D. Welfare gains by commodity; 5. Welfare gains from futures by commodity; V. Extensions; A. Options; 9. Net foreign assets and welfare gains with options and futures contracts; B. Default |
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10. Borrowing capacity, equilibrium net foreign assets and welfare gains with defaultable debtVI. Conclusion; I. Commodity price data; 6. Commodity price data from International Finance Statistics; II. Model with hedging; III. Notes on numerical simulations; IV. Maximum likelihood estimation; References; Footnotes |
| Summary |
This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. The introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path. Second, by reducing the country's need to hold foreign assets as precautionary savings (or by improving the country's ability to borrow against future export income). Under plausibly calibrated parameters, the second channel may lead to much la |
| Notes |
Print version record |
| Subject |
Hedging (Finance) -- Econometric models
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Futures -- Econometric models
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Commodity futures -- Econometric models
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Commodity futures -- Econometric models
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Futures -- Econometric models
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Hedging (Finance) -- Econometric models
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| Form |
Electronic book
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| Author |
Sandri, Damiano
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Jeanne, Olivier
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| ISBN |
9781452710709 |
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1452710708 |
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