This paper aims to measure the effects of commodity price variations on output fluctuations over time in the State of Espírito Santo. The impacts of these prices on the State's economy compared to the national economy and other Brazilian states will also be measured. The results obtained reveal five distinct empirical patterns: (i) given the state's high degree of openness, the impacts of commodity price fluctuations tend to be stronger when compared to Brazil and other Brazilian States; (ii) Granger-causality test results show that commodity prices precede output levels both in the case of the State and the country; (iii) a similar result occurs when a broad set of economic variables related to the State of Espírito Santo are considered; (iv) a positive shock to commodity prices causes output to initially rise , followed by a contraction, with this variable displaying a permanently higher level in the long run; (v) variance decomposition results show that, on average, the quantitative impacts of commodity price shocks are larger in the case of the State than the country. The results obtained are robust with regards to several specification issues, such as different stationary transformations of data, as well as distinct number of lags employed in Granger-causality tests. These results are important in the sense of providing a better understanding of the effects of commodity price variations on a small, open economy, as seems to be the case for the State of Espírito Santo.
Open-economy macroeconomics; Commodities; Espírito Santo
