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Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies

Andrés Fernández Martin (), Andres Gonzalez () and Diego Rodriguez ()

BORRADORES DE ECONOMIA from BANCO DE LA REPÚBLICA

Abstract: Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). We document how these fluctuations correlate strongly with the business cycle in EMEs. We then embed a commodity sector into a multi-country EMEs business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces. The estimated model assigns to commodity shocks 42 percent of the variance in income, of which a considerable part is linked to the common factor. A further amplification mechanism is a spillover effect from commodity prices to risk premia.

Keywords: Emerging economies; business cycles; commodity prices; common factors; Bayesian estimation; dynamic stochastic equilibrium models. (search for similar items in EconPapers)
JEL-codes: E32 F41 F44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-opm
Date: 2015-11-18
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Related works:
Journal Article: Sharing a ride on the commodities roller coaster: Common factors in business cycles of emerging economies (2018) Downloads
Working Paper: Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015) Downloads
Working Paper: Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015) Downloads
Working Paper: Sharing a Ride on the Commodities Roller Coaster; Common Factors in Business Cycles of Emerging Economies (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:014054

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