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Not all Shocks are Shared Equally: Commodity Exporters and International Risk Sharing

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  • Luttini, Emiliano
  • Mekonnen, Dawit
  • Mercer-Blackman, Valerie
  • Sørensen, Bent

Abstract

Using world-commodity prices as an instrument, we propose a novel method for decomposing channels of international risk sharing for commodity-exporting countries. We identify the commodity “sector” as the projection of GDP growth on commodity price growth and the non-commodity “sector” as its orthogonal complement. We find that commodity price risk is shared significantly more than other risk in resource-rich countries. Shocks to GDP are smoothed via pro-cyclical savings, especially government savings, and counter-cyclical international factor income. Risk sharing from government savings is stronger at shorter than at longer time horizons.

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  • Luttini, Emiliano & Mekonnen, Dawit & Mercer-Blackman, Valerie & Sørensen, Bent, 2025. "Not all Shocks are Shared Equally: Commodity Exporters and International Risk Sharing," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361019, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361019
    DOI: 10.22004/ag.econ.361019
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