American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Trade in Commodities and Business Cycle Volatility
American Economic Journal: Macroeconomics
vol. 13,
no. 3, July 2021
(pp. 173–208)
Abstract
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 multisector 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.Citation
Kohn, David, Fernando Leibovici, and Håkon Tretvoll. 2021. "Trade in Commodities and Business Cycle Volatility." American Economic Journal: Macroeconomics 13 (3): 173–208. DOI: 10.1257/mac.20180131Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- F14 Empirical Studies of Trade
- F41 Open Economy Macroeconomics
- F44 International Business Cycles