Commodity exports, financial frictions, and international spillovers

Romain Houssa, Jolan Mohimont and Christopher Otrok

European Economic Review, 2023, vol. 158, issue C

Abstract: This paper offers a solution to the international co-movement puzzle found in open-economy macroeconomic models. We develop a small open economy (SOE) dynamic stochastic general equilibrium (DSGE) model describing three endogenous channels that capture spillovers from the world to a commodity exporter: a world commodity price channel, a domestic commodity supply channel, and a financial channel. We estimate our model with Bayesian methods on two commodity-exporting SOEs, namely Canada and South Africa. In addition to explaining international business cycle synchronization, the new model attributes an important fraction of business cycle fluctuations to foreign shocks in the SOEs.

Keywords: International spillovers; Commodities; Financial frictions; Small-open economy; DSGE; Bayesian; Foreign shocks; Monetary policy (search for similar items in EconPapers)
JEL-codes: C33 C51 E3 E43 E52 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Commodity Exports, Financial Frictions and International Spillovers (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:158:y:2023:i:c:s0014292123000946

DOI: 10.1016/j.euroecorev.2023.104465

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