A Barrel of Oil or a Bottle of Wine : How Do Global Growth Dynamics Affect Commodity Prices?

Author/Editor:

Tahsin Saadi Sedik ; Serhan Cevik

Publication Date:

January 1, 2011

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

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:

This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.

Series:

Working Paper No. 11/1

Subject:

English

Publication Date:

January 1, 2011

ISBN/ISSN:

9781455211791/1018-5941

Stock No:

WPIEA2011001

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

19

Please address any questions about this title to publications@imf.org