Naraidoo, RuthiraPaez-Farrell, Juan2024-03-052024-03-052023-06Naraidoo, R. & Paez-Farrell, J. 2023, 'Commodity price shocks, labour market dynamics and monetary policy in small open economies', Journal of Economic Dynamics and Control, vol. 151, art. 104654, pp. 1-26, doi : 10.1016/j.jedc.2023.104654.0165-1889 (print)1879-1743 (online)10.1016/j.jedc.2023.104654http://hdl.handle.net/2263/95068We analyse the transmission mechanism of commodity price shocks in inflation targeting emerging economies. Using a panel vector autoregression, we find that for a commodity exporter, the shock causes a real exchange rate appreciation, increases in output, inflation, the nominal interest rate and the trade balance, and a fall in the unemployment rate. The mechanism underlying the dynamics driving the VAR can be understood using a dynamic stochastic general equilibrium model. Search and matching frictions in the labour marken© 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license.Commodity pricesEmerging marketsInflationMonetary policySearch and matchingUnemploymentDutch diseaseDSGE modellingDynamic stochastic general equilibrium (DSGE)Bayesian impulse response matchingSDG-08: Decent work and economic growthArticle