Reinhart, Carmen and Borensztein, Eduardo (1994): The determinants of commodity prices. Published in: IMF Staff Papers , Vol. 41, No. 2 (June 1994): pp. 175-213.
Download (5Mb) | Preview
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 ncorporates 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.
|Item Type:||MPRA Paper|
|Original Title:||The determinants of commodity prices|
|Keywords:||world demand US dollar commodity supply prices oil|
|Subjects:||F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation: Models and Applications
F - International Economics > F3 - International Finance > F30 - General
F - International Economics > F3 - International Finance > F39 - Other
|Depositing User:||Carmen Reinhart|
|Date Deposited:||09. Mar 2009 16:13|
|Last Modified:||14. Feb 2013 00:03|
Aizenman. Joshua. and Eduardo R. Borensztein. "Debt and Conditionalitv Under Endogenous Terms of Trade Adjustment." Staff Papers. International Monetary Fund. Vol. 35 December 1988), pp. 686-713.
Alogoskoufis. George, and Panayotis Varangis, "OECD Fiscal Policies and the Relative Prices of Primary Commodities." Policy Research Working Paper 955 (Washington: World Bank. 1992).
Arrau, Patricio. Jose De Gregorio, Carmen Reinhart. and Peter Wickham. "The Demand for Money in Developing Countries: Assessing the Role of Financial Innovation," IMF Working Paper 91/45 (Washington: International Monetary Fund. 1991), forthcoming in Journal of Development Economics.
Chu. Ke-Younl1:. and Thomas K. Morrison. "The 1981-82 Recession and Non-Oil Primary Commodity Prices." Staff Papers. International Monetary Fund. Vol. 31 (March 1984). pp. 93-140.
Deaton, Angus, and Guy Laroque. "On the Behavior of Commodity Prices," Review of Economic Studies. Vol. 59 (January 1992), pp. 1-23.
Dornbusch. Rudiger, "Policy and Performance Links Between LDC Debtors and Industrial Nations." Brookings Papers on Economic Activity: 2 (1985), pp. 303-356.
Dornbusch R, "Inflation, Exchange Rates. and St;lbilization." Essays in International Finance No. 165 (Princeton, New Jersey: Princeton University, 1986).
Englander. A. Steven, "Commodity Prices in the Current Recovery," Federal Reserve Bank of New York Quarterly Review, Vol. 10 (Spring 1985), pp. 11-19.
Gilbert. Christopher L.. "The Impact of Exchange Rates and Developing Country Debt on Commodity Prices." Economic Journal. Vol. 99 (September 1989), pp. 773-84.
Hansen. Lars Peter. and Robert J. Hodrick. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis." Journal of Political Economy, Vol. 88 (October 1980), pp. 829-53.
Hausman. J.A., "Specification Tests in Econometrics." Econometrica, Vol. 46 (November 1978), pp. 1251-71.
Holtham. G.H .• "Modelling Commodity Prices in a World Macroeconomic Model." in International Commodity Market Models and Policy Analysis, ed. by O. Guvenen (Dordrecht: Boston: Kluwers. 1988), pp. 221-58.
Kaminsky, Graciela. and Manmohan S. Kumar. "Efficiency in Commodity Futures Markets," Staff Papers. International Monetary Fund. Vol. 37 (September 1990), pp. 670-99.
Leamer, Edward E., "Vector Autoregressions for Causal Inference?" Carnegie-Rochester Conference Series on Public Policy, Vol. 22 (1985), pp. 255-304.
Meese, Richard A., and Kenneth Rogoff (1983a), "Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?"' Journal of International Economics. Vol. 14 (February 1983). pp. 3-2-t
Morrison. Thomas. and Michael Wattleworth, "The 1984-86 Commodity Recession: An Analysis of the Underlying Causes." IMF Working Paper 87nl (Washington: International Monetary Fund. 1987).
Mussa. Michael. "Nominal Exchange Rate Regimes and the Behavior of Real Exchange Rates: Evidence and Impiications." Carnegie-Rochester Conference Series on Public Policy. Vol. 25 (Autumn 1986), pp. 117-214.
Pindyck. Robert S.. and Julio J. Rotemberg. "The Excess Co-Movement of Commodity Prices." Economic Journal .-C (1990). pp. 1173-89.
Reinhart. Carmen M.. "Fiscal Policv. the Real Exchange Rate. and Commoditv Prices." Staff Papers. Internat'ional Monetary Fti'nd. Vol. 38 (September 1991). pp. 506-524.
Reinhart., Carmen. and Peter Wickham. "Commodity Prices: Cyclical Weakness or Secular Decline?" Staff Papers. International Monetary Fund. Vol. 41 (June 1994), pp. 175-213.
World Bank. Global Economic Prospects and the Developing Countries (Washington: World Bank. 1994).