The Transmission of Commodity Price Super-Cycles

Abstract

We examine two key channels through which commodity price super-cycles affect the economy: a wealth channel, through which higher commodity prices increase domestic demand, and a cost channel, through which they induce wage increases.By exploiting regional variation in exposure to commodity price shocks and administrative firm-level data from Brazil, we empirically disentangle these transmission channels.We introduce a dynamic, two-region model with heterogeneous firms and workers to further quantify the mechanisms and evaluate welfare.A counterfactual economy in which commodity booms are purely endowment shocks experiences only 45% of the intersectoral labor reallocation between tradables and nontradables, and 40% of the within-tradables labor reallocation between domestic and exported production.Labor market frictions lead to persistent unemployment as the boom fades, and as a result the welfare gains obtained from a commodity super-cycle are 50% lower relative to those which would be obtained under a fully-flexible labor market.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 37 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.