Domestic linkages and the transmission of commodity price shocks

Damian Romero

Journal of International Economics, 2025, vol. 153, issue C

Abstract: This paper studies the role of input–output (IO) linkages in the propagation of commodity price shocks. We present empirical evidence documenting a positive correlation between commodity prices and GDP that decreases in the intensity of production linkages between the commodity sector and the rest. In a model for a small open economy, stronger linkages reduce the demand for inputs by the commodity sector, dampening the response of real GDP after a positive commodity price shock. A calibrated version of the model shows that the elasticity of GDP would be 6% lower if the commodity sector had been 5% more connected.

Keywords: Emerging economies; Business cycles; Commodity prices; Input–output linkages (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Domestic Linkages and the Transmission of Commodity Price Shocks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:153:y:2025:i:c:s0022199624001685

DOI: 10.1016/j.jinteco.2024.104041

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