## Recent Inflationary Trends in World Commodities Markets

_IMF Working Papers, May 1, 2008_

## Source details

**Canonical URL:** [Recent Inflationary Trends in World Commodities Markets](https://www.imf.org/en/publications/wp/issues/2016/12/31/recent-inflationary-trends-in-world-commodities-markets-21967)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/recent-inflationary-trends-in-world-commodities-markets-21967/index.md)
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## Bibliographic details
- Authors: Noureddine Krichene
- Published: May 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451869897.001

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### Summary findings
- Expansionary monetary policies in key industrial countries and sharply depreciating U.S. dollar exchange rate sent commodities prices soaring at unprecedented rates during 2003-2007.
- Food prices rose to alarming levels threatening malnutrition and food riots.
- Consumer price indices, a leading indicator for monetary policy, were showing almost no inflation despite record low interest rates, double digit commodities inflation, and sharp exchange rate depreciation.
- Commodities prices were shown to be driven by one common trend, identified as a monetary shock.

### Analysis of drivers
- Monetary conditions: Expansionary monetary policies in key industrial countries are identified as a primary driver of the commodities price surge.
- Exchange rate movements: A sharply depreciating U.S. dollar exchange rate is linked with the commodities price increases.
- Common trend identification: Empirical evidence in the paper attributes commodities price behavior to a single common trend—referred to as a monetary shock.
- Inflation measurement puzzle: Consumer price indices did not reflect the commodities inflationary pressures, creating a price puzzle for monetary policymakers.

### Policy dilemma and scenarios
- Policymakers may face a choice between:
  - Maintaining an expansionary monetary policy stance, with potential outcomes of accelerating commodities price inflation, subsequent world recession, and financial disorder.
  - Tightening monetary policy, with potential outcomes of subsequent world recession followed by recovery and financial and price stability.

### Subjects and keywords (as provided)
- Subject: Commodity price indexes, Commodity prices, Inflation, Oil prices, Price indexes
- Keywords: commodities price, federal funds rate, monetary policy, WP

*Source: Noureddine Krichene, "Recent Inflationary Trends in World Commodities Markets", IMF Working Paper (May 1, 2008).*

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## Content in this bundle

- **1. Commodity Price Indices, Annual Percent Change, 1973–2007**
  - [1. Commodity Price Indices, Annual Percent Change, 1973–2007 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp08130.pdf.md){rel="alternate" type="text/markdown"}
  - [1. Commodity Price Indices, Annual Percent Change, 1973–2007 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp08130.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/recent-inflationary-trends-in-world-commodities-markets-21967_