Assessing the Commodity Market Price and Terms of Trade Exposures of Macroeconomy in Emerging and Developing Countries

Abstract

This paper provides novel evidence on commodity market exposure, i.e., the impacts of commodity price and terms of trade fluctuations on macro performance amongst 46 emerging and developing countries (EMDCs) in Africa, Asia and the Latin American and Caribbean (LAC) region. We estimate the exposure of six macroeconomic variables to the commodity prices and terms of trade. Our results indicate that in overall terms, there is a strong and statistically significant long-run relationship between the vector of analyzed world trade prices and macro variables in all EMDCs. However, based on the short-term reactions, only about 10% of the macroeconomic variation amongst the EMDCs is due to commodity market-related exposures. Our results also indicate that the commodity market exposure is not unanimous across countries, amongst regions, or especially between measures of exposure.