Sharing a ride on the commodities roller coaster: Common factors in business cycles of emerging economies

Abstract

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World Shocks, World Prices, and Business Cycles

“…This is 46 percentage points more than in the 1960 to 2015 sample. This …nding is consistent with Fernández, González, and Rodríguez (2015), who estimate that a country-speci…c commodity price measure explains about 50 percent of aggregate ‡uctuations in Brazil, Chile, Colombia, and Peru over the period 2000 to 2014. It is also consistent with the …ndings of Shousha (2015), who documents that in a group of advanced and emerging commodity exporters world price shocks played a major role in driving short-run ‡uctuations since the mid-1990s.…”

Bond finance, bank credit, and aggregate fluctuations in an open economy

“…We underestimate somewhat the volume of bank loans, but importantly, they are still over twice as large in the model as bonds, as is the case in the data. While we underestimate the bank operating costs, as discussed previously, the 25 Specically, it follows from HT that, for the model to be well behaved, the parameters c, b, B and R must satisfy: 0 < A <Ā < I − I m < I, b + c > B > b. Also, the Lagrange multipliers associated with (11) and (12) must be positive.…”

“…One is the median ratio of gross foreign bank loans stock to quarterly GDP, reported in In addition to the six equations just listed, the unknowns c, b, B, σ G , i = I/K f and R must satisfy several inequalities. 25 Hence we choose values for those unknowns to minimize a weighted average of the dierences between the model-generated and empirical ratios subject to the required inequalities. Details are given in the Appendix.…”

On Corporate Borrowing, Credit Spreads and Economic Activity in Emerging Economies: An Empirical Investigation

“…A recent paper by Gozzi et al (2015) documents key characteristics of corporate bonds markets in EMEs. 13 The academic literature that we use is: Neumeyer and Perri (2005), Uribe and Yue (2006), Aguiar and Gopinath (2007), Fernández and Gulan (2015), and Fernández et al, 2015a. The multilateral organizations and rating agencies that we look at are i) the IMF; ii) MSCI; and iii) JPMorgan.…”

“…The most agnostic and reduced-form approach has been to estimate a process for spreads by simply regressing them to (lagged) country "fundamentals" such as output, investment, the trade balance and white noise perturbations, in the context of SVAR models (Uribe and Yue, 2006;Akinci, 2013). An alternative semi-structural approach has been to directly postulate a link between spreads and (latent or observed) country fundamentals included in the structural model such as future expected productivity or the price of commodities exported by the EME and then calibrate (or estimate) such linkages within the context of the calibration (or estimation) of the full-blown dynamic general equilibrium model (Neumeyer and Perri, 2005;Chang and Fernández, 2013;Fernández et al, 2015a). This captures the idea that productivity and/or commodity prices contain information on the creditworthiness of the borrower EME to the extent that they are a determinant of its repayment capacity.…”