Working papers
Working papers
Windfalls for all?
International elasticities and Dutch disease in a commodity export economy
January, 2025
Abstract: This paper analyzes the effect of commodity price variations on both overall and sectoral outcomes in a commodity exporting economy. Using Chilean and international copper market data, I find positive copper price changes coming from copper-specific demand shocks generate a broad GDP expansion and no fall in exports across all sectors, including manufacturing. These results provide evidence against the Dutch disease hypothesis related to the crowding out effect of commodity price increases on the manufacturing sector. I then estimate key structural parameters of a small open economy business-cycle model with three sectors and find a low degree of substitution between domestic and foreign goods explains the positive sectoral effect of a commodity price shock. Finally, I evaluate how tariffs on imports shape the effect of commodity price shocks and find low tariffs make the small open economy less sensitive to commodity price shocks when the elasticity of substitution between domestic goods and imports is small.
Work in progress
Exporting Inflation (with Marco Hernández-Vega)
Abstract: Using export price changes to other destinations as instruments, this paper examines the pass-through of inflationary pressures from large economies to a smaller trade partner through two transmission mechanisms: the cost channel, which operates through changes in foreign input prices, and the market channel, which reflects changes in foreign export prices in markets where they compete directly with domestic products. We estimate instrumental-variable local projection models on a panel comprising Mexican consumer and producer price indices, as well as U.S. and Chinese export unit values. We find that changes in U.S. export prices exert significant effects on producer prices through the market channel, while effects on consumer prices emerge only after 2020 and persist for up to two years. Similarly, changes in Chinese export prices significantly affect both producer and consumer prices, but only before 2020. In contrast, inflationary pressures transmitted through the cost channel significantly affect producer prices only in the case of the United States and for about one year, while they have no significant effect on consumer prices; likewise, Chinese exported input prices do not significantly affect either producer or consumer prices.