Trade in Commodities and Business Cycle Volatility

David Kohn, Fernando Leibovici and Håkon Tretvoll

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 3, 173-208

Abstract: This paper studies the role of differences in the patterns of production and international trade on the business cycle volatility of emerging and developed economies. We study a multisector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional and time-series differences across countries. Emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies to commodity price fluctuations. We show evidence consistent with this mechanism using cross-country data.

JEL-codes: E23 E32 F14 F41 F44 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Trade in Commodities and Business Cycle Volatility (2018)
Working Paper: Trade in Commodities and Emerging Market Business Cycles (2017)
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DOI: 10.1257/mac.20180131

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