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TERRA ECONOMICUS

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  • A study of budget vulnerability in commodity-dependent economies: A methodology for accounting for price shocks in exported resources

A study of budget vulnerability in commodity-dependent economies: A methodology for accounting for price shocks in exported resources


TERRA ECONOMICUS, Vol. 23, No 2,

Citation: Sokolov I.A., Suchkova O.V., Kazakova J.E., Repkina E.V. (2025). A study of budget vulnerability in commodity-dependent economies: A methodology for accounting for price shocks in exported resources. Terra Economicus 23(2), 77–91 (in Russian). DOI: 10.18522/2073-6606-2025-23-2-77-91

Acknowledgment:

The paper analyzes the impact of fluctuations in the prices of exported goods on government revenues. Despite changes that contribute to diversifying the export structure and increasing budget stability, many countries including Russia still have a strong focus on raw materials exports. The structure of these exports is an important part of the mechanism that transmits the effects of price changes in natural resources to government budgets. A wide range of resources leads to a compensatory effect on budget revenue. In addition, we study not only the standard price for a single commodity, but also the structure of raw materials export through a price index for a basket of raw materials. This index is calculated as a Paasche Index based on contract prices and volumes of sales of the five main categories of natural resources exports in terms of value for each country under consideration. Regression results based on data for 23 exporting countries over the 2000–2021 period confirm a robust positive impact on government revenue from the price index. Although the budgets of raw material exporting countries remain vulnerable to shocks in prices, diversifying their export structures can reduce volatility in government revenue. Furthermore, the paper demonstrates that when only one type of commodity is considered, fiscal vulnerability is overestimated compared with the results obtained when considering the full range of exported products.

Keywords: fiscal vulnerability; government revenue; commodity export; commodity price volatility; resource based economy
JEL codes: C51, E62, E64, H6, Q3


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Publisher: Southern Federal University
ISSN: 2073-6606