Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329554 
Year of Publication: 
2023
Citation: 
[Journal:] EconomiA [ISSN:] 2358-2820 [Volume:] 24 [Issue:] 2 [Year:] 2023 [Pages:] 264-311
Publisher: 
Emerald, Bingley
Abstract: 
Purpose: The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective. Design/methodology/approach: The authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components. Findings: The authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy. Practical implications Given the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices. Originality/value: This paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.
Subjects: 
DSGE
News shocks
Commodity prices
Small open economies
JEL: 
E32
F41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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