Effect of Sovereign Wealth Funds in Commodity-Exporting Economies when Commodity Prices Affect Interest Spreads
We reconsider the role of a sovereign wealth fund in commodity-exporting economies facing recent volatile fluctuations of commodity prices due to the COVID-19 shock. We examine the welfare-improving effect of a sovereign wealth fund from the new perspective of the link between commodity prices and interest rate spreads, which is unique to emerging economies. We show that a sovereign wealth fund becomes more effective in improving welfare for commodity-exporting economies with a stronger link between their commodity prices and interest rate spreads.
Sovereign wealth fund; Commodity prices; Interest rate spreads; DSGE model; Financial frictions; Emerging economies
E32, E44, F32, O20, Q48
Research Institute for Economics and Business Administration
Rokkodai-cho, Nada-ku, Kobe
Faculty of International Studies, Hiroshima City University