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 the patterns of production and international trade on the higher business cycle volatility of emerging 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 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 fluctuations in commodity prices. We show evidence consistent with these findings 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)
New Economics Papers: this item is included in nep-dge, nep-int, nep-mac and nep-opm
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Working Paper: Trade in Commodities and Emerging Market Business Cycles (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2018-005
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