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Commodity Prices and Labour Market Dynamics in Small Open Economies
We investigate the connection between commodity price shocks and unemployment in advanced resource-rich small open economies from an empirical and theoretical perspective. Shocks to commodity prices are shown to influence labour market conditions primarily through the real exchange rate. The empirical impact of commodity price shocks is obtained from estimating a panel vector autoregression; a positive price shock is found to expand the components of GDP, to cause the real exchange rate to appreciate, and to improve labour market conditions. For every one percent increase in commodity prices, ...