Business cycle variations are a common feature of the global economy and impose severe macroeconomic consequences when they occur. This thesis focuses on the role of commodity price shocks in explaining the presence of large disruptions in the business cycles of Emerging Market Economies (EME’s) and Advanced Economies (AE’s). The thesis consists of three Essays. The first essay examined the role of commodity price shocks (acting as an income shock) in explaining corruption in resource rich countries. Using a theoretical model based on the non-benevolent principal-agent framework and an empirical strategy using the Panel Quantile regression approach of Powell (2016), I find that corruption in resource rich countries increase significantly in response to commodity price shocks and that significant differences exist in country effects and type of commodity exported. The second essay examined the sources of the large real exchange rate variations in EME’s by conducting an accounting exercise that decomposes the real exchange rate changes into a tradable and non-tradable component. I find that the relative price of tradable goods is the largest determinant of real exchange rate changes in both EME’s and AE’s and that commodity prices have a sizeable impact in explaining the puzzlingly large variability of international prices in EMEs. The final essay examined the contribution of commodity terms of trade shocks to the dynamics of real exchange rates in EME’s. This is motivated by the observation that the relative importance of tradable and non-tradable goods to exchange rate variations depends largely on the choice of price series used in measuring tradable and non-tradable goods. In the paper, I measure tradable goods price using a purely traded goods price -commodity terms of trade prices and decompose the historical commodity price variations into common and idiosyncratic components using the Panel Structural Vector Autoregressive (PSVAR) approach of Pedroni (2013). I find that the relative price of tradable goods variations dominates the variations in real exchange rates even for tradable goods measured using purely traded goods price and that the effects of commodity price shocks in EME’s and AE’s are mainly due to common factors in commodity price variations.