IMF Working Papers

The Power of Prices: How Fast Do Commodity Markets Adjust to Shocks?

By Christian Bogmans, Andrea Pescatori, Ivan Petrella, Ervin Prifti, Martin Stuermer

April 16, 2024

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Format: Chicago

Christian Bogmans, Andrea Pescatori, Ivan Petrella, Ervin Prifti, and Martin Stuermer. "The Power of Prices: How Fast Do Commodity Markets Adjust to Shocks?", IMF Working Papers 2024, 077 (2024), accessed January 18, 2025, https://doi.org/10.5089/9798400271953.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper establishes supply and demand elasticities for a broad set of commodities based on a consistent dataset and identification methodology. We apply granular IV methods to a new cross-country panel dataset of commodity production and consumption from 1960-2021. The results indicate that commodity demand and supply are typically price inelastic. Demand and supply tend to be the most inelastic for minerals, whereas they are most elastic for agricultural commodities. The elasticities of energy commodities fall somewhere in between. Supply and demand become more elastic at longer time horizons for mineral and energy commodities, but not for most agricultural commodities.

Subject: Agricultural commodities, Commodities, Consumption, Demand elasticity, Economic theory, National accounts, Supply elasticity

Keywords: Agricultural commodities, Agriculture, Commodities, Commodity demand and supply, Commodity demand and supply elastities, Consumption, Demand, Demand elasticity, Energy, Energy commodity, Global, International trade, Metals., Mineral commodity, Minerals, Price elasticities, Supply, Supply and demand elasticity, Supply elasticity

Publication Details

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