Shocks in commodity prices have been viewed as a major driver of emerging economies’ business cycle. We show this is not the case for Brazil, Chile, Colombia, and Peru (all commodity exporters) after allowing for a full macro-finance linkage, at world and domestic level, in a structural VAR. To achieve our results, the international bloc of the VAR includes a measure of global GDP, an aggregate commodity price index, and a volatility index (VIX). The presence of this last variable, from which we capture global economic uncertainty shock, is responsible for modifying established results. Global demand shocks have been the main international driver of the business cycle in Brazil, Chile, and Peru, while global economic uncertainty shocks have been the most important international driver of the Colombian GDP. Aggregate shocks to the world commodity market become more relevant only when a less structured model of the global economy is in place, since commodity prices react endogenously to innovations elsewhere, playing a major role as a propagator. The econometric models also include the following domestic variables: GDP, CPI, sovereign spread, nominal exchange rate, and policy interest rate.

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