Introduction

Kang, Ratti, and Vespignani (2020) embarked on a pertinent exploration into the realm of global economics, addressing the impact of shocks stemming from global commodity prices and stock market volatility on various countries. They published their findings in the Journal of Asian Economics under the title, "Global commodity prices and global stock market volatility shocks: Effects across countries".

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Research Methods

The authors employ a series of well-defined methodologies. These include a detailed theoretical analysis followed by rigorous empirical testing using the monthly data spanning from 1974 to 2019 for 35 countries . The use of the two-stage least squares instrumental variable (2SLS-IV) estimation and the local projections method also underpin the robustness of their findings.

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Findings

The study reveals that global commodity prices and stock market volatility shocks indeed exert significant effects across countries. It was determined that an upsurge in global commodity prices leads to an increase in domestic output for commodities-exporting countries, but a decrease for commodities-importing countries. Similarly, a global stock market volatility shock was found to reduce output in all countries regardless of their export-import status .

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Discussion

The authors' findings highlight the intricate dynamics that exist in the interplay between global commodity prices, stock market volatility, and the domestic output of countries. The fact that commodities-exporting and importing countries react differently to global commodity price shocks underscores the diversity of the world's economic constructs.

The broad-reaching impacts that follow stock market volatility shocks also portray the heavy intertwining of global economies. Therefore, there is an impetus for countries to put in place measures that will cushion their economies against such shocks.

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Conclusions

Kang, Ratti, & Vespignani’s study contributes significantly to our understanding of the impact of global commodity prices and stock market volatility shocks on economies worldwide. It provides key insights into the global economic interconnectedness and highlights the need for policies that assist in mitigating the risks associated with such global market forces.

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References

Kang, W., Ratti, R.A. and Vespignani, J., 2020. Global commodity prices and global stock market volatility shocks: Effects across countries. Journal of Asian Economics, 71, p.101249.