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Domestic linkages and the transmission of commodity price shocks

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  • Romero, Damian

Abstract

This paper studies the role of input–output (IO) linkages in the propagation of commodity price shocks. We present empirical evidence documenting a positive correlation between commodity prices and GDP that decreases in the intensity of production linkages between the commodity sector and the rest. In a model for a small open economy, stronger linkages reduce the demand for inputs by the commodity sector, dampening the response of real GDP after a positive commodity price shock. A calibrated version of the model shows that the elasticity of GDP would be 6% lower if the commodity sector had been 5% more connected.

Suggested Citation

  • Romero, Damian, 2025. "Domestic linkages and the transmission of commodity price shocks," Journal of International Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:inecon:v:153:y:2025:i:c:s0022199624001685
    DOI: 10.1016/j.jinteco.2024.104041
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    More about this item

    Keywords

    Emerging economies; Business cycles; Commodity prices; Input–output linkages;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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