Campus Units

Finance

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

3-1-2010

Journal or Book Title

International Review of Finance

Volume

10

Issue

1

First Page

93

Last Page

124

DOI

10.1111/j.1468-2443.2009.01101.x

Abstract

During a financial crisis, the loss of access to world capital markets may force heavily indebted countries to accelerate their production of exhaustible resources. Few studies consider the impact that financial crises have on real behavior, and no existing studies appear to consider the impact a crisis might have on resource production. We find that four major state-owned enterprises in Brazil, Chile and Mexico substantially expanded their production and world market share of copper, iron ore and oil during the 1980s' international financial crisis. There was also a very large expansion, followed by a sharp contraction, of production of tin in Brazil and silver in Mexico. In contrast, Indonesia – a major resource producer who did not succumb to the 1980s' financial crisis – did not accelerate production during the 1980s' crisis, and resource production in the United States sharply contracted during this period. Our study provides new insights into why the prices of natural resources are so volatile and highlights a previously unexplored reason for financial contagion: one country's efforts to service its debt can drive down resource prices and revenues to other indebted resource producers.

Comments

This is an accepted manuscript of an article from International Review of Finance , 2010, 10(1); 93-124. DOI: 10.1111/j.1468-2443.2009.01101.x. Posted with permission.

Copyright Owner

International Review of Finance Ltd

Language

en

File Format

application/pdf

Published Version

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