The effects of global shocks on small commodity-exporting economies: New evidence from Canada

Juan Dolado and Valery Charnavoki

No 8825, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper presents a structural dynamic factor model of a small commodity-exporting economy using Canada as a representative case study. Combining large panel data sets of the global and Canadian economies, we first identify those demand and supply shocks that explain most of the volatility in real commodity prices. Next we quantify their dynamic effects on a wide variety of variables for this economy. We are able to reproduce all the main stylized facts documented in the literature about business cycles in these countries. This includes spending and Dutch disease effects which have proven difficult to find in models where the innovations to commodity prices are not properly identified. Our results are quite robust to different identification schemes of the shocks.

Keywords: Commodity exports; Commodity prices; Business cycles; Factor models; Vars (search for similar items in EconPapers)
JEL-codes: C32 F44 Q43 (search for similar items in EconPapers)
Date: 2012-02
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Citations: View citations in EconPapers (7)

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