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Title: The effects of global shocks on small commodity-exporting economies: New evidence from Canada

Author(s): Valery Charnavoki and Juan J. Dolado

Publication Date: February 2012

Keyword(s): business cycles, commodity exports, commodity prices, factor models and VARs

Programme Area(s): International Macroeconomics

Abstract: This paper presents a structural dynamic factor model of a small commodity-exporting economy using Canada as a representative case study. Combining large panel data sets of the global and Canadian economies, we first identify those demand and supply shocks that explain most of the volatility in real commodity prices. Next we quantify their dynamic effects on a wide variety of variables for this economy. We are able to reproduce all the main stylized facts documented in the literature about business cycles in these countries. This includes spending and Dutch disease effects which have proven difficult to find in models where the innovations to commodity prices are not properly identified. Our results are quite robust to different identification schemes of the shocks.

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Bibliographic Reference

Charnavoki, V and Dolado, J. 2012. 'The effects of global shocks on small commodity-exporting economies: New evidence from Canada'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8825