The Macroeconomic Determinants of Commodity Prices

Author/Editor:

Eduardo Borensztein ; Carmen Reinhart

Publication Date:

January 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The “traditional structural approach” to the determination of real commodity prices has relied exclusively on demand factors as the fundamentals that explain the behavior of commodity prices. This framework, however, has been unable to explain the marked and sustained weakness in commodity prices during the 1980s and 1990s. This paper extends that framework in two important directions: First, it incorporates commodity supply in the analysis, capturing the impact on prices of the sharp increase in commodity exports of developing countries during the debt crisis of the 1980s. Second, we take a broader view of “world” demand that extends beyond the industrial countries and includes output developments in Eastern Europe and the former Soviet Union (FSU). The empirical results support these extensions, as both the fit of the model improves substantially and, more importantly, its ability to forecast increases markedly.

Series:

Working Paper No. 94/9

Subject:

Notes:

Also published in Staff Papers, Vol. 41, No. 2, June 1994.

English

Publication Date:

January 1, 1994

ISBN/ISSN:

9781451927221/1018-5941

Stock No:

WPIEA0091994

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

37

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