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Global liquidity and commodity market interactions: Macroeconomic effects on a commodity exporting emerging market

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  • Souza, Rodrigo da Silva
  • Fry-McKibbin, Renée

Abstract

This paper examines the effects of commodity demand and supply shocks as well as international liquidity shocks on the small open economy of Brazil using an SVAR model. The paper highlights the importance of modelling both types of shocks in the commodity sector. Including only commodity prices overstates the effect of commodity price shocks on the output of Brazil. Commodity demand shocks are much larger than commodity supply shocks in the long run. Including commodity demand and international liquidity also reduces the impact of commodity price shocks on the interest rate made available to Brazil in international capital markets. There is little evidence of Dutch disease for Brazil. However, our results show that Brazil is vulnerable to external shocks.

Suggested Citation

  • Souza, Rodrigo da Silva & Fry-McKibbin, Renée, 2021. "Global liquidity and commodity market interactions: Macroeconomic effects on a commodity exporting emerging market," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 781-800.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:781-800
    DOI: 10.1016/j.iref.2021.07.008
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    Cited by:

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    4. Doojav, Gan-Ochir & Luvsannyam, Davaajargal & Enkh-Amgalan, Elbegjargal, 2023. "Effects of global liquidity and commodity market shocks in a commodity-exporting developing economy," Journal of Commodity Markets, Elsevier, vol. 30(C).
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    6. Radosław Puka & Bartosz Łamasz & Iwona Skalna & Beata Basiura & Jerzy Duda, 2023. "Knowledge Discovery to Support WTI Crude Oil Price Risk Management," Energies, MDPI, vol. 16(8), pages 1-14, April.

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    More about this item

    Keywords

    Commodity demand shocks; Commodity supply shocks; Emerging market interest rates; Brazil; Dutch disease; SVAR;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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