Trade in Commodities and Business Cycle Volatility
David Kohn (),
Fernando Leibovici () and
No 2018-5, Working Papers from Federal Reserve Bank of St. Louis
This paper studies the role of differences in the patterns of production and international trade on the business cycle volatility of emerging and developed economies. We study a multi-sector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional and time-series differences across countries. Emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies to commodity price fluctuations. We show evidence consistent with this mechanism using cross-country data.
Keywords: International business cycles; output volatility; emerging economies (search for similar items in EconPapers)
JEL-codes: E32 F4 F41 F44 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-07-10, Revised 2019-07-10
New Economics Papers: this item is included in nep-dge, nep-int, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2018-005
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