Commodity price shocks and the balance sheet effect in emerging economies

被引:0
作者
Alejandro Torres-García
Jaime Montoya-Arbeláez
Laura Wberth-Escobar
机构
[1] Universidad EAFIT,School of Economics and Finance
[2] Universidad de Antioquia,Faculty of Economic Sciences
来源
Economic Change and Restructuring | 2022年 / 55卷
关键词
Emerging economies; Commodity prices; International business cycles; Balance sheet effect; O110; F41; F44; G15;
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学科分类号
摘要
We study the role of commodity price shocks in explaining business cycles in emerging economies, but including a financial transmission mechanism that has been understudied in the conventional literature. A negative commodity price shock not only affects the aggregate demand but also increases a firm’s external debt and the cost of new debt. Consequently, the aggregate investment decreases, amplifying the output contraction. Using information for five Latin American commodity-exporting countries, we find that these shocks explain between 29 and 40% of output variation, supporting their importance as a source of business cycles. Moreover, the inclusion of financial variables to capture the balance sheet effect causes an overreaction of output of between 20 and 22% compared with a conventional model, verifying the importance of this mechanism.
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页码:2081 / 2110
页数:29
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