Domestic Linkages and the Transmission of Commodity Price Shocks

Damian Romero

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper studies the role of input-output (IO) linkages in the transmission of commodity price fluctuations. Empirically, the positive correlation between commodity prices and GDP decreases in the degree of IO linkages. In a model of a commodity-exporting economy where international markets set the commodity price, IO linkages reduce the demand for inputs by the commodity sector, dampening the level of income of the country after a positive commodity price shock. In a calibrated version of the model, the elasticity of GDP to commodity prices would be at least 7% higher if the commodity sector had been 10% less connected.

Date: 2022-01
New Economics Papers: this item is included in nep-hme and nep-opm
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Journal Article: Domestic linkages and the transmission of commodity price shocks (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:936

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