TY - JOUR AU - Fernández, Andrés AU - Schmitt-Grohé, Stephanie AU - Uribe, Martín TI - World Shocks, World Prices, and Business Cycles: An Empirical Investigation JF - National Bureau of Economic Research Working Paper Series VL - No. 22833 PY - 2016 Y2 - November 2016 DO - 10.3386/w22833 UR - http://www.nber.org/papers/w22833 L1 - http://www.nber.org/papers/w22833.pdf N1 - Author contact info: Andrés Fernández Research Department Central Bank of Chile Agustinas 1180 Santiago Chile E-Mail: afernandezm@bcentral.cl Stephanie Schmitt-Grohé Department of Economics Columbia University 420 West 118th Street, MC 3308 New York, NY 10027 Tel: 212/854-8059 Fax: 212/854-4010 E-Mail: stephanie.schmittgrohe@columbia.edu Martín Uribe Department of Economics Columbia University International Affairs Building New York, NY 10027 Tel: 212 851 4008 Fax: 212 854 8059 E-Mail: martin.uribe@columbia.edu M1 - published as Andrés Fernández, Stephanie Schmitt-Grohé, Martín Uribe. "World Shocks, World Prices, and Business Cycles: An Empirical Investigation," in Richard Clarida, Lucrezia Reichlin, and Michael Devereux, organizers, "NBER International Seminar on Macroeconomics 2016" Journal of International Economics, Volume 108, Supp. 1 (Elsevier) (2017) M3 - presented at "International Seminar on Macroeconomics - Hosted by Sofia University", June 24-25, 2016 AB - Most existing studies of the macroeconomic effects of global shocks assume that they are mediated by a single intratemporal relative price such as the terms of trade and possibly an intertemporal price such as the world interest rate. This paper presents an empirical framework in which multiple commodity prices and the world interest rate transmit world disturbances. Estimates on a panel of 138 countries over the period 1960-2015 indicate that world shocks explain on average 33 percent of aggregate fluctuations in individual economies. This figure doubles when the model is estimated on post 2000 data. The increase is attributable mainly to a change in the domestic transmission mechanism as opposed to changes in the world commodity price process as argued in the literature on the financialization of world commodity markets. ER -