Sustainability Implications of Commodity Price Shocks and Commodity Dependence in Selected Sub-Saharan Countries

Abstract

Sub-Saharan economies often rely heavily on a narrow range of commodities, making them particularly vulnerable to price fluctuations in global markets. This volatility predisposes these countries to economic instability, threatening short-term growth and long-term development goals. As a result, this study examines the sustainability implications of commodity price volatility and commodity dependence for 31 Sub-Saharan African countries from 2000 to 2023. Eleven agricultural commodity-dependent countries, six energy commodity-dependent countries, and fourteen mineral and metal ore-dependent countries were chosen. This study uses balanced annual panel data from World Development Indicators, World Bank Commodity Price Data, and Federal Reserve Bank Data. The data were analyzed using the VECM, and this study’s findings were threefold and unanimous for all three categories of commodities (agricultural, energy and mineral, and metal ore). First, commodity dependence is positively related to economic growth, suggesting that higher commodity prices benefit the economy in the long run. Second, commodity price volatility is negatively related to economic growth, indicating adverse impacts on economic stability in the long run. Third, commodity dependence is positively related to commodity price volatility in the long run. By analyzing the interconnectedness of these factors, this study underscores the need for diversified economic policies and sustainable practices to reduce vulnerability and promote sustainable development in the region. The findings highlight the critical role of strategic resource management and policy interventions in achieving economic stability and ensuring the well-being of future generations.