Global liquidity and commodity market interactions: Macroeconomic effects on a commodity exporting emerging market

Rodrigo da Silva Souza, Renée Fry-McKibbin*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    11 Citations (Scopus)

    Abstract

    This paper examines the effects of commodity demand and supply shocks as well as international liquidity shocks on the small open economy of Brazil using an SVAR model. The paper highlights the importance of modelling both types of shocks in the commodity sector. Including only commodity prices overstates the effect of commodity price shocks on the output of Brazil. Commodity demand shocks are much larger than commodity supply shocks in the long run. Including commodity demand and international liquidity also reduces the impact of commodity price shocks on the interest rate made available to Brazil in international capital markets. There is little evidence of Dutch disease for Brazil. However, our results show that Brazil is vulnerable to external shocks.

    Original languageEnglish
    Pages (from-to)781-800
    Number of pages20
    JournalInternational Review of Economics and Finance
    Volume76
    DOIs
    Publication statusPublished - Nov 2021

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