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Global financial cycle, commodity terms of trade and financial spreads in emerging markets and developing economies

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  • Carrera, Jorge
  • Montes-Rojas, Gabriel
  • Toledo, Fernando

Abstract

We examine how negative shocks which affect global financial conditions spill over into EMDEs through a fall in commodity terms of trade and greater financial spread. We estimate a two-equation dynamic panel data model for 33 of these economies during 1999.Q1-2020.Q4 to identify the effect of changes in the global financial conditions on the terms of trade and financial spread of commodities in these countries. In the first round, we focus on the diffusion of external negative financial spillovers from the financial center (the US) to the financial periphery, and to terms of trade and financial spread of commodities, leaving aside the feedback which operates from the first variable to the second one. In the second round, we allow commodities terms of trade to exert feedback on financial spreads. We find that the sign of this relationship depends on the productive structure and external trade pattern but differs from that of commodity net exporters and commodity net importers.

Suggested Citation

  • Carrera, Jorge & Montes-Rojas, Gabriel & Toledo, Fernando, 2023. "Global financial cycle, commodity terms of trade and financial spreads in emerging markets and developing economies," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 179-190.
    • Handle: RePEc:eee:streco:v:64:y:2023:i:c:p:179-190
    DOI: 10.1016/j.strueco.2022.12.006
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    1. Agustín Cucchiaro, 2023. "Latin America in the global financial cycle: Vulnerability or resilience? An analysis of the Argentine case," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(82), pages 128-158, November.

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    More about this item

    Keywords

    Global financial cycle; Commodity terms of trade; Financial spreads; Dynamic panel data; VAR models;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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