The effects of global shocks on small commodity-exporting economies : lessons from Canada
Title: The effects of global shocks on small commodity-exporting economies : lessons from Canada
Citation: American economic journal : macroeconomics, 2014, Vol. 6, No. 2, pp. 207-237
ISSN: 1945-7715; 1945-7707
We propose 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 do- mestic economies, sign restrictions are used to identify relevant demand and supply shocks that explain volatility in real commod- ity prices. We quantify their dynamic effects on a wide variety of Canadian macro variables. We are able to reproduce all the main stylized features at business-cycle frequencies documented in the literature on this type of economies. These include a Dutch disease effect which has proven hard to find in empirical studies.
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