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The Causal Effects of Commodity Shocks

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  • Alisson Curatola-Melo
  • Bernardo Guimarães

Abstract

This paper disentangles the causal effects of commodity price movements on emerging market indicators from those driven by correlated external factors, such as global growth expectations and financial conditions. We employ an identificationthrough- heteroskedasticity approach using USDA Grain Stock reports, which have an exogenous impact on soybean, corn, and wheat prices. Our findings show that the causal effects of grain price shocks on default risk, stock indexes, and exchange rates are typically less than half the size of the unadjusted estimates.

Suggested Citation

  • Alisson Curatola-Melo & Bernardo Guimarães, 2025. "The Causal Effects of Commodity Shocks," Working Papers Series 639, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:639
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    File URL: https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/WP639.pdf
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    References listed on IDEAS

    as
    1. Choi, Sangyup & Furceri, Davide & Loungani, Prakash & Mishra, Saurabh & Poplawski-Ribeiro, Marcos, 2018. "Oil prices and inflation dynamics: Evidence from advanced and developing economies," Journal of International Money and Finance, Elsevier, vol. 82(C), pages 71-96.
    2. Fernández, Andrés & Schmitt-Grohé, Stephanie & Uribe, Martín, 2017. "World shocks, world prices, and business cycles: An empirical investigation," Journal of International Economics, Elsevier, vol. 108(S1), pages 2-14.
    3. Alessandri, Piergiorgio & Gazzani, Andrea, 2025. "Natural gas and the macroeconomy: Not all energy shocks are alike," Journal of Monetary Economics, Elsevier, vol. 151(C).
    4. McKenzie, Andrew M. & Ke, Yangmin, 2022. "How do USDA announcements affect international commodity prices?," Journal of Commodity Markets, Elsevier, vol. 28(C).
    5. Ben Zeev, Nadav & Pappa, Evi & Vicondoa, Alejandro, 2017. "Emerging economies business cycles: The role of commodity terms of trade news," Journal of International Economics, Elsevier, vol. 108(C), pages 368-376.
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