Federal Reserve Bank of St. Louis
Trade in Commodities and Business Cycle Volatility
This paper studies the role of differences in the patterns of production and international trade on the business cycle volatility of emerging and developed 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 and time-series 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 commodity price fluctuations. We show evidence consistent with this mechanism using cross-country data.
Cite this item
David Kohn & Fernando Leibovici & Hakon Tretvoll, Trade in Commodities and Business Cycle Volatility, Federal Reserve Bank of St. Louis, Working Papers 2018-5, 10 Jul 2018, revised 10 Jul 2019.
- 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
Keywords: International business cycles; output volatility; emerging economies
This item with handle RePEc:fip:fedlwp:2018-005
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