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The effects of global shocks on small commodity-exporting economies: New evidence from Canada

Author

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  • Charnavoki, Valery
  • Dolado, Juan J.

Abstract

This paper presents 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 Canadian economies, we first identify those demand and supply shocks that explain most of the volatility in real commodity prices. Next we quantify their dynamic effects on a wide variety of variables for this economy. We are able to reproduce all the main stylized facts documented in the literature about business cycles in these countries. This includes spending and Dutch disease effects which have proven difficult to find in models where the innovations to commodity prices are not properly identified. Our results are quite robust to different identification schemes of the shocks.

Suggested Citation

  • Charnavoki, Valery & Dolado, Juan J., 2012. "The effects of global shocks on small commodity-exporting economies: New evidence from Canada," CEPR Discussion Papers 8825, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8825
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Juan José Echavarría & Andrés González, 2012. "Choques internacionales reales y financieros y su impacto sobre la economía colombiana," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 30(69), pages 14-66, Diciembre.
    2. Chen, Liang & Dolado, Juan J. & Gonzalo, Jesús, 2014. "Detecting big structural breaks in large factor models," Journal of Econometrics, Elsevier, vol. 180(1), pages 30-48.
    3. Hilde C. Bjørnland & Leif Anders Thorsrud, 2013. "Boom or gloom? Examining the Dutch disease in a two-speed economy," CAMA Working Papers 2013-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

    business cycles; commodity exports; commodity prices; factor models; VARs;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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