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Unveiling the dance of commodity prices and the global financial cycle
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Juvenal, Luciana and Petrella, Ivan (2024) Unveiling the dance of commodity prices and the global financial cycle. Journal of International Economics, 150 . 103913. doi:10.1016/j.jinteco.2024.103913 ISSN 0022-1996.
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Official URL: https://doi.org/10.1016/j.jinteco.2024.103913
Abstract
We examine the impact of commodity price changes on the business cycles and capital flows in emerging markets and developing economies (EMDEs), distinguishing between their role as a source of shock and as a channel of transmission of global shocks. Our findings reveal that surges in export prices, triggered by commodity price shocks, boost domestic GDP, an effect further amplified by the endogenous decline of country spreads. However, the effects on capital flows appear muted. Shifts in U.S. monetary policy and global risk appetite drive the global financial cycle in EMDEs. Eased global credit conditions, attributed to looser U.S. monetary policy or lower global risk appetite, lead to a rise in export prices, higher output, a decrease in government borrowing costs, and stimulate greater capital flows. The endogenous response of export prices amplifies the output effects of a more accommodative U.S. monetary policy while country spreads magnify the impact of shifts in global risk appetite.
Item Type: | Journal Article | ||||||||
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Journal or Publication Title: | Journal of International Economics | ||||||||
Publisher: | Elsevier BV | ||||||||
ISSN: | 0022-1996 | ||||||||
Official Date: | July 2024 | ||||||||
Dates: |
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Volume: | 150 | ||||||||
Article Number: | 103913 | ||||||||
DOI: | 10.1016/j.jinteco.2024.103913 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 13 February 2024 | ||||||||
Date of first compliant Open Access: | 15 March 2024 | ||||||||
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