Global Dollar Shocks and Spillovers into EMDEs: The Channels of Commodity Prices and Country Risk

Gaston Marinelli

No 4818, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: This paper shows how global dollar appreciations transmit to emerging market and developing economies (EMDEs) through commodity prices and country risk. Using quarterly data for 22 EMDEs from 1999–2019, I combine the Obstfeld & Zhou (2023) dataset with country-specific commodity price indices and classify countries as commodity exporters or importers via a trade-balance rule. Global dollar appreciation shocks explain up to 16% of the forecast-error variance of commodity terms of trade (CToT) and up to 9% of EMBI spreads. A global dollar appreciation depreciates EMDE currencies, raises EMBI, depresses investment, and lowers GDP, with muted CPI effects. Stratifying by commodity status reveals sharp heterogeneity: exporters suffer larger and more persistent adverse responses, while importers seem stable. To uncover mechanisms, I implement an approach `a la Cloyne–Jord`a–Taylor (2023) to estimate indirect effects. A more favorable CToT response mitigates output and demand contractions, whereas higher commodity import prices and larger EMBI responses amplify adverse outcomes.

JEL-codes: C3 F4 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:aep:anales:4818

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