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Trade in Commodities and Business Cycle Volatility

Author

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  • Kohn, David
  • Leibovici, Fernando

    () (Federal Reserve Bank of St. Louis)

  • Tretvoll, Hakon

Abstract

This paper studies the role of the patterns of production and international trade on the higher business cycle volatility of emerging economies. We study a multi-sector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional differences across countries: emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies to fluctuations in commodity prices. We show evidence consistent with these findings using cross-country data.

Suggested Citation

  • Kohn, David & Leibovici, Fernando & Tretvoll, Hakon, 2018. "Trade in Commodities and Business Cycle Volatility," Working Papers 2018-5, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2018-005
    DOI: 10.20955/wp.2018.005
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    References listed on IDEAS

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    Cited by:

    1. Alejandro Torres García & Laura Wberth Escobar, 2018. "Commodity Prices Shocks and the Balance Sheet Effect in Latin America," DOCUMENTOS DE TRABAJO CIEF 016362, UNIVERSIDAD EAFIT.

    More about this item

    Keywords

    International business cycles; output volatility; emerging economies;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • 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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