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

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

No 2015/280, IMF Working Papers from International Monetary Fund

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: WP; exchange rate; commodity price; Emerging economies; business cycles; commodity prices; common factors; Bayesian estimation; dynamic stochastic equilibrium models; export share; standard deviation; capital goods; commodity shock; time series; commodity production; consumption good; endowment sector; commodity endowment sector; shock process; spot price; Commodity price shocks; Commodity price indexes; Commodity price fluctuations; Global (search for similar items in EconPapers)
Pages: 60
Date: 2015-12-29
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Citations: View citations in EconPapers (4)

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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)
Working Paper: Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015)
Working Paper: Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015)
Working Paper: Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015)
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