Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies
Electronic Access:
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Summary:
Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). We document how these fluctuations correlate strongly with the business cycle in EMEs. We then embed a commodity sector into a multi-country EMEs’ business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces. The estimated model assigns to commodity shocks 42 percent of the variance in income, of which a considerable part is linked to the common factor. A further amplification mechanism is a ”spillover” effect from commodity prices to risk premia.
Series:
Working Paper No. 2015/280
Subject:
Commodities Commodity price fluctuations Commodity price indexes Commodity price shocks Commodity prices Prices
English
Publication Date:
December 29, 2015
ISBN/ISSN:
9781513587677/1018-5941
Stock No:
WPIEA2015280
Pages:
60
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