Commodity Price Shocks and Macroeconomic Dynamics

Download or read book Commodity Price Shocks and Macroeconomic Dynamics written by Ruthira Naraidoo and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyse the transmission mechanism of commodity price shocks in emerging economies. Using a panel vector autoregression, we find that the shock leads to a real exchange rate appreciation, increases in output, inflation the nominal interest rate and the trade balance, and a fall in the unemployment rate. The transmission mechanism can be understood using a dynamic stochastic general equilibrium model of a small commodity-exporting open economy with nominal as well as search and matching frictions. We find that the conduct of monetary policy is key to both the variables' dynamics as well as to the magnitude of Dutch disease effects.