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

By Andrés Fernández, Andrés González, D. Rodríguez. Social Science Research Network, 2015

183 citations recorded by the source corpus.

Fluctuations in commodity prices are an important driver of business cycles in small emerging market economies (EMEs). This paper documents how these fluctuations correlate strongly with the business cycle in EMEs. A commodity sector is then embedded 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.

Subfields: Industrial and Manufacturing Engineering

View Paper: https://www.semanticscholar.org/paper/cc0cec3e661a05ace3077a2f3ff1dc081239d73b

Citations in the corpus

• Oil price elasticities and oil price fluctuations (2016, unknown): “Fernandez et al. (2015) also find that shocks to the prices of exported commodities explain a considerable portion of business cycle fluctuations in emerging economies.”
• Commodity Booms and Busts in Emerging Economies (2017, unknown): “Fernández et al. (2015) highlight the strong negative effect of commodity price increases on country risk premia in sovereign bond spreads.”