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The Effects of Global Shocks on Small Commodity-Exporting Economies: Lessons from Canada

Author

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  • Valery Charnavoki
  • Juan J. Dolado

Abstract

We propose a structural dynamic factor model of a small commodity-exporting economy, using Canada as a representative case study. Combining large panel data sets of the global and do- mestic economies, sign restrictions are used to identify relevant demand and supply shocks that explain volatility in real commod- ity prices. We quantify their dynamic e ffects on a wide variety of Canadian macro variables. We are able to reproduce all the main stylized features at business-cycle frequencies documented in the literature on this type of economies. These include a Dutch disease eff ect which has proven hard to find in empirical studies.

Suggested Citation

  • Valery Charnavoki & Juan J. Dolado, 2014. "The Effects of Global Shocks on Small Commodity-Exporting Economies: Lessons from Canada," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 207-237, April.
  • Handle: RePEc:aea:aejmac:v:6:y:2014:i:2:p:207-37
    Note: DOI: 10.1257/mac.6.2.207
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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