Transmission of US monetary policy to commodity exporters and importers

This paper studies international transmission of U.S. monetary policy shocks to commodity exporters and importers. After first showing empirically that the shocks have stronger effects on commodity exporters than on importers using structural VARs, I then augment a standard three-country model to include commodities. Consistent with the empirical evidence, the model indicates that an expansionary monetary policy shock to the U.S. increases the aggregate output of commodity exporters by more than that of importers. This is primarily because the increased U.S. aggregate demand triggered by the shock leads to greater U.S. demand for commodities and higher commodity prices, and thus the exports of commodity exporters increase relative to those of commodity importers. (C) 2021 Elsevier Inc. All rights reserved.