Not all Shocks are Shared Equally: Commodity Exporters and International Risk Sharing

Emiliano Luttini, Dawit Mekonnen, Valerie Mercer-Blackman and Bent Sørensen

No 361019, 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO from Agricultural and Applied Economics Association

Abstract: Using world-commodity prices as an instrument, we propose a novel method for decomposing channels of international risk sharing for commodity-exporting countries. We identify the commodity “sector” as the projection of GDP growth on commodity price growth and the non-commodity “sector” as its orthogonal complement. We find that commodity price risk is shared significantly more than other risk in resource-rich countries. Shocks to GDP are smoothed via pro-cyclical savings, especially government savings, and counter-cyclical international factor income. Risk sharing from government savings is stronger at shorter than at longer time horizons.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 37
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea25:361019

DOI: 10.22004/ag.econ.361019

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