The Causal Effects of Commodity Shocks

Alisson Curatola-Melo and Bernardo Guimarães

No 639, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper disentangles the causal effects of commodity price movements on emerging market indicators from those driven by correlated external factors, such as global growth expectations and financial conditions. We employ an identificationthrough- heteroskedasticity approach using USDA Grain Stock reports, which have an exogenous impact on soybean, corn, and wheat prices. Our findings show that the causal effects of grain price shocks on default risk, stock indexes, and exchange rates are typically less than half the size of the unadjusted estimates.

Date: 2025-12
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