International Commodity Prices Research Articles

Inflation – Causes and Measures. Inflation in Romania

Abstract The causes of global inflation developments are the central subject of political debates, after in 2022 it became a global phenomenon, remaining above the average of the pre-pandemic period. According to the World Bank, there is a wide range of shocks to global supply and demand, oil prices and global interest rates that together drive global inflation. According to the International Monetary Fund, the global recovery is becoming increasingly sluggish and with growing regional divergences, with a future downward trend in global growth below the historical average of the period 2000-2019. Moreover, it is estimated that inflation will subside in the next period, but without reaching the estimated target for 2025. However, Romania has the highest inflation rate in the EU, increasing double the average of the EU countries. There are views that monetary policy, more rigor in fiscal consolidation and lower international commodity prices can control inflation and rein in debt growth. But what measures have been adopted in this regard and why does Romania have a different evolutionary trajectory?

Political influence on international climate agreements with border carbon adjustment

We study the influence of industrial lobbying on national climate policies and the formation of an international environmental agreement if the coalition countries use border carbon adjustments to protect domestic producers. We find that the effects of this political influence crucially depend on the distribution of carbon tax revenues. If these are transferred to the households, lobbying distorts carbon taxes downwards to reduce the tax burden and does not affect coalition sizes. This leads to higher emissions and lower welfare. By contrast, if tax revenues are given back to the firms, lobbies in the outsider countries favor carbon taxes, whereas lobbies in the coalition countries favor carbon subsidies to raise the international commodity price. This reduces the tax difference and the welfare difference between the countries, which reduces the free-rider incentives. Then, lobbying stabilizes the grand coalition and reduces global emissions compared to a “perfect” world without lobbying if the political influence is sufficiently strong.

Understanding the role of China's factors in international commodity price fluctuations: A perspective of monetary-fiscal policy interaction

This paper examines the role of China's factors in international commodity price fluctuations from a perspective of monetary-fiscal policy interaction. We employ a nonlinear Interacted-VAR model to investigate whether the impact of China's monetary policy shocks on international commodity prices is conditional on its fiscal policy stances. Using several measures of China's fiscal policy stance, we estimate their interaction with monetary policy identified through Interacted-VAR analysis. We find that the response of international commodity prices to China's monetary policy is much stronger and more persistent in the presence of its active fiscal policy stance. The empirical findings are very consistent when using several alternative model specifications. Moreover, our analysis suggests that failing to take into account the interaction of monetary-fiscal policies in the model might lead to incorrectly assessing the impact of monetary policy on commodity price fluctuations. In addition, our results reveal the substantial heterogeneity in the impact of China's factors on commodity prices across sectors. These empirical findings offer insights into the interaction of monetary-fiscal policies, as well as the role of China's factors in the international commodity markets.

A Study on the Impact of External Shocks on the Resilience of China’s Grain Supply Chain

Grain supply is the lifeblood of a country, and the stability of the supply chain is a crucial prerequisite for ensuring national grain security. This paper draws on the definition of resilience in physics and economics. It takes supply chain fracture resilience, impact resilience, and synergy resilience as the secondary indicators. It constructs a comprehensive evaluation indicator system of the grain supply chain resilience, measures the resilience indicator of China’s grain supply chain from 1996 to 2021, and analyzes the role of supply, cost, exchange rate, and other external shocks in influencing the resilience of China’s grain supply chain on this basis. The study found that the overall level of China’s total grain supply chain resilience has been growing year by year and can be divided into three stages: low-level stabilization stage, continuous growth stage, and high-level stabilization stage. Grain supply chain fracture resilience has been growing steadily, grain supply chain impact resilience fluctuation is more obvious, and grain supply chain synergy resilience has been changing more gently. In the inquiry of the impact of external shocks on the resilience of China’s grain supply chain, it was found that world grain exports and the RMB exchange rate have a significant positive impact on China’s grain supply chain resilience level, while the international oil price has a significant negative impact. Based on this, the paper puts forward suggestions for ensuring stable production and supply in the grain market, improving the structure of foreign trade in grain, and actively coping with international commodity price shocks.

Analyze the Impact of International Commodity Prices on Inflation

With the development of globalization, the fluctuation of international commodity prices has an important impact on the global economy. By examining price data for major commodities such as crude oil, soybeans, copper, and gold between 2018 and 2023, and exploring the transmission mechanism to inflation in different countries, we attempt to uncover the nature of this effect. By analyzing the transmission path of commodity prices to inflation, we delve into how these commodity price fluctuations affect inflation levels in different countries.This article find that its price fluctuations tend to cause a chain reaction around the world, which has an important impact on inflation. However, we also recognize that the impact of international commodities on inflation is subject to a combination of many factors. Domestic economic conditions, the flexibility of monetary policy, the balance of supply and demand in the market and other factors also have an important impact on inflation. Therefore, in this study, we try to consider these factors in order to explain the formation mechanism of inflation more comprehensively. In the future, we recommend paying closer attention to the dynamics of international commodity markets and their complex relationship with inflation to better address global economic challenges.

Factors Influencing the Prices of Red Chili and Shallots in Indonesia: Analysis of the Impact on the Global Market

Movements in international commodity prices became significant when three stages of crisis occurred in the world economy, namely the world oil price crisis, the global financial crisis and the world food price crisis. This situation can have an impact on Indonesia's economic growth. The objectives of this research are: 1 Do fluctuations in world oil prices affect the prices of chilies and shallots in Indonesia (2) Do fluctuations in the rupiah exchange rate affect the prices of chilies and shallots in Indonesia (3) Do global prices of chilies and shallots influence the prices of chilies and shallots in Indonesi. The information used is secondary time series data from 1980 to 2019 . The food commodities being studied are : world price of chilies and shallots , value Rupiah exchange , price world oil as well price chilies and onions red Domestically , based on estimation results, it shows that international prices such as world oil prices have a significant positive effect on domestic prices of chilies and shallots . The Rupiah exchange rate has a significant positive effect on the price of chilies and shallots in Indonesia, while the world price of chilies and shallots has a negative effect and has no This is significant for the price of chilies and shallots in the country. This is because chilies and shallots are products that are widely produced domestically. Most of the Chilies and Shallots sold in Indonesia are domestically produced, so the prices of Chilies and Shallots in Indonesia are more influenced by production costs and government policies and supply and demand in the Indonesian market. This can be done by improving infrastructure, especially transportation networks and storage facilities. Empowering farmers by providing financial and technical support. Developing different food sources to reduce dependence on limited food sources, and consumer protection with fair prices for consumers as well as providing support for subsidy programs needed to help stabilize food prices

De-industrialization in Azerbaijan's Textile Subsectors: Canonical Correlation Analysis and the Dutch Disease Hypothesis

Since 2014, academic studies have increasingly underscored the potential adverse consequences associated with Azerbaijan's imbalanced and dependent economic structure. It is widely recognized that countries relying heavily on the export of primary commodities are ill-prepared for situations characterized by sharp declines in international commodity prices. Hence, the objective of this paper is to examine the Azerbaijani economy amidst two parallel developments: the growth of oil-related macroeconomic indicators and the contraction of non-oil subsectoral industrial production. To achieve this, the analytical framework of the Dutch disease, a widely preferred theory to study commodity exporters, and canonical correlation analysis (CCA) were employed in the period 1995 to 2021. The findings reveal statistically significant canonical correlations between certain subsectors of the textile industry (such as ginned cotton, cotton fabric, silk fabric, bed linen of cotton, and cotton yarn) and the Dutch disease variables (e.g., oil rent, real effective exchange rate), while other subsectors (including carpets, crocheted legwear and garments, outerwear, underwear, and footwear) do not exhibit similar patterns. These results show that non-consumer subsectors of the textile subsectors, especially the cotton sector, are more vulnerable to the effects of Dutch disease than consumer subsectors of the textile subsectors. In addition, the oil rent variable is a persistent channel that shows a negative correlation with the latent variables of the textile subsectors. These results prompt policymakers and researchers to reassess the role of large extractive industries in a small, open economy like Azerbaijan and to formulate economic policies that safeguard and foster specific subsectors.

The Relationship Between Money Supply and Price Movements from A Structural Perspective

This paper examines the impact of money creation and flow on prices, including house prices and financial asset prices, from a structural perspective. By analyzing central bank monetary statistics, the study highlights the relationship between money supply and price changes, emphasizing long-term effects on consumer prices and short-term effects on incremental household deposits. Furthermore, the study emphasizes the importance of monitoring changes in the money supply, both domestically and internationally, with specific attention to the PPI (Producer Price Index) changes. The real estate market is identified as a significant driver of money creation, particularly through deposits in non-bank financial institutions. Additionally, deposits in non-bank financial institutions are found to be an important indicator of stock market volatility. The paper recommends that asset prices be included as a key target of monetary policy and advocates closely monitoring trends in international commodity prices.

Exploring the Factors Influencing the Impact of the COVID-19 Pandemic on Global Shipping: A Case Study of the Baltic Dry Index

The outbreak of COVID-19 in 2020 resulted in notable disruptions to global shipping and the global economy. As a key indicator influenced by supply and demand conditions in the shipping industry, the Baltic Dry Index (BDI) serves as an early economic indicator for global economic production. Contrary to expectations of decline, the BDI has exhibited a substantial increase. This research paper aims to investigate the impact of the COVID-19 pandemic on global shipping through a comprehensive analysis of the BDI. The study incorporates data spanning from 2019 to 2021, encompassing the pre- and post-pandemic periods. It examines 13 independent variables, including raw material prices (such as iron ore prices), international scrap steel prices, energy prices, stock market indexes, international commodity price volatility (as represented by the Commodity Research Bureau Index), global port calls, and confirmed COVID-19 cases. The primary objective is to explore the factors influencing the BDI and how they were affected by the pandemic. The study employs stepwise regression to select variables and build models before and after the pandemic. The findings of this study elucidate the prominent factors that influence the BDI in different temporal contexts. Before the outbreak, the BDI was notably impacted by variables, including the US Dollar Index (positive relationship), Brent, Port Calls, and CRB Index. However, a discernible shift in the relative significance of these factors has been observed in the post-pandemic period. Specifically, the US Dollar Index now exhibits a negative relationship with the BDI, whereas variables such as Port Calls, Iron Price, Steel Scrap Price, and confirmed COVID-19 cases had attained heightened prominence in shaping the dynamics of the freight index. These findings underscored the dynamic nature of the factors influencing the BDI, particularly in light of the unique circumstances brought about by the COVID-19 pandemic.

Post-Keynesian Economics: New Foundations by Marc LavoieChapter 8: Inflation Theory

ABSTRACT The conflicting claims approach to the theory of inflation so thoroughly surveyed and well presented in Chapter 8 of Lavoie's [(2022). Post-Keynesian Economics. New Foundations. Cheltenham, UK: Edward Elgar Publishing] book is deservedly becoming increasingly consensual among heterodox (and even some notable mainstream) macroeconomists. However, the relevance of a concept (and the very existence of) a single NAIRU (Non-Accelerating Inflation Rate of Unemployment) derived consistently from the very premises of the conflicting claims approach is still very controversial. In this review article, we will be to argue that a NAIRU is not really useful for the conflicting claims approach. The key aspects explored here are: (1) the different roles of hysteresis in the output and labor markets; (2) the assumptions concerning real profit markups of firms; and (3) the extent to which money wage increases actually incorporate past (or expected) inflation. We also add some remarks regarding the role of changes in international commodity prices and nominal exchange rates that further illustrate the necessary relation between conflicting claims inflation and the theory of distribution and relative prices.

The impact of international commodity price shocks on macroeconomic fundamentals: Evidence from the US and China

In light of the increased volatility in international commodity markets, we aim to investigate the effects of international commodity price shocks on the macroeconomic fundamentals of the United States and China. We expand upon existing literature by employing the Dynamic Hierarchical Factor Model (DHFM) to analyze commodities across different sectors. This approach allows us to uncover the heterogeneity and specific synergies among various commodity categories. Furthermore, we construct the Factor Augmented Vector Autoregression Model (FAVAR) and the Time-varying Parameter FAVAR model, utilizing the common factors extracted and monthly data on fundamental macroeconomic variables from the US and China. By conducting impulse response analysis, we empirically demonstrate the impact of international commodity price shocks on key macroeconomic indicators, including industrial production, CPI, interest rates, stock prices, and exchange rates. Moreover, we provide evidence that these impacts exhibit significant variations over time, particularly in response to major global events such as the 2008 Global Financial Crisis, the 2020 COVID-19 pandemic, and the 2022 Russia-Ukraine conflict crisis. Our findings yield valuable insights for investors, researchers, and policymakers seeking to understand the influence of international commodity prices on macroeconomic conditions.

Collateral damage? Welfare effects of the Ukraine war on Pakistan

The 2022 Ukraine conflict has contributed to a major spike in international commodity prices. In this study, we conduct a top-down, macro-micro simulation analysis by combining Computable General Equilibrium simulations with data from the 2018–19 Pakistan Household Integrated Economic Survey to analyze the impact of global price shock to four major commodities, namely wheat, vegetable oil, petroleum, and fertilizers. We come up with evidence for a significant, non-negligible negative impact of the price shock, both at the aggregate and the household level: Real GDP shrinks and real household consumption and income decrease. The drop in consumption and income is more visible among farm households, with the two falling by 5% and 3.48% respectively. The consumption and income of the above-median income households fall more steeply, and income inequality decreases. The USD3.2 headcount poverty rate at the 2018 purchasing power parity increases by 1.15%. Urban households show the worst decline in food security, both in incidence and intensity. The role of petrol prices in driving poverty among rural farm households and that of food stuff (wheat and vegetable oil prices) in aggravating urban food security is particularly evident. These findings highlight the poverty and food security-worsening dimension of the Russo-Ukrainian conflict.

Assessment of the Effects of Monetary Policy Shocks from ECOWAS Member Countries to Nigeria

The paper evaluated the effects of monetary policy shocks from ECOWAS Member Countries to Nigeria using a combination of quarterly, annual time-series and panel data spanning from 1995–2021. The Standard Global Vector-Autoregressive (GVAR) Model of analysis was used to draw structural inference for the study using data on: consumer prices, international commodity prices (oil, agricultural raw material and metal ore), exchange rate, interest rate (short and long run), real output, money supply, and export diversification index. The result of the Impulse Response Function (IRF) revealed that shocks resulting from monetary policy transmission from the ECOWAS member Countries to Nigeria has diverse effects on Nigeria and is largely determined by the extent of monetary policy accommodative stance. The shock that may occur is likely to be country-specific because ECOWAS is an economic union that hardly has the foundation to share common economic or monetary risk. Additionally, the extent of trade flow between Nigeria and the rest of ECOWAS, determines the tendency that such shocks affect Nigeria. Finally, whether ECOWAS is a shock source, or a channel of transmission determines how much of an impact shocks from that region will have.

Do remittances react to commodity windfall? Evidence from Latin America and the Caribbean

Remittance has been growing steadily in the past decades, along with the pace of globalization. The current literature has focused extensively on the impact of remittances on growth, while the causal evidence in identifying the relationship between income shocks and remittances is limited. Using a panel of 30 countries in Latin American and Caribbean (LAC) region from 1990–2014, we examine the effects of exogenous income from international commodity price windfall on remittances. Our paper finds that an increase in commodity windfall leads to a significant rise in remittance inflows. We also reveal that financial development underpins the “commodity windfall-remittances” relation. Remittance is a low-cost financing option in countries with low levels of financial development; hence they receive more remittance flow in response to the commodity windfall. Our finding calls for more policy attention to promote migrants’ access to financial services.

Islamic Republic of Mauritania

Volatile commodity prices and a tightly managed exchange rate (ER) have led to boom and bust cycles with significant impacts on the public and financial sectors. While the previous Extended Credit Facility (ECF) arrangement (December 2017—March 2021) has helped maintain macroeconomic stability, the pandemic has delayed structural reform implementation and widened the gap to reach the Sustainable Development Goals (SDGs). In addition, surging international commodity prices since the start of Russia’s war in Ukraine have deteriorated the external and fiscal balances and led to inflationary pressures and food insecurity. In March 2021, the authorities requested a successor arrangement to support accelerated implementation of their national development strategy, help increase social and infrastructure spending, and improve governance and the business environment.

Republic of Kosovo

The increase in energy and food prices after Russia’s war in Ukraine is weighing on private demand, activity, and inflation. Real GDP growth has decelerated to 2–3 percent in 2022, after recovering by 10.7 percent in 2021, and inflation increased to more than 11 percent. Growth is projected to moderately pick up to 3.5 percent in 2023, and inflation to decline to 5 percent, though these forecasts crucially depend on the assumption that international commodity prices will ease. Uncertainty remains high, with risks to the downside for growth and to the upside for inflation.

Exploring the effect of climate risk on agricultural and food stock prices: Fresh evidence from EMD-Based variable-lag transfer entropy analysis

Climate has traditionally played an important role in the development of countries, owing to its inherent relationship with agricultural output and pricing. This study explores one such association between the most well-known climate anomaly, the El Niño34 Southern Oscillation, and international commodity prices of agriculture and food indexes. This study addresses the potentially causal effect of El Niño34 on international agricultural and food stock prices. To do so, we develop a novel approach: the empirical mode decomposition variable-lag transfer entropy (EMD-VL transfer entropy) by combining the variable-lag transfer entropy framework and the empirical mode decomposition. The evidence reveals the following major results. First, climate shocks affect global agricultural stock prices in the short-term. Second, significant transfer entropy from El Niño34 to food index appeared at mid- and long-term business cycles. Third, unidirectional causal effect from climate shocks to agricultural and food stock prices is more intense in the short business cycle attesting to the impact of climate shocks on the food market, which is especially visible in the short-term horizon. Finally, our proposed method exceeds the traditional variable-lag transfer entropy by detecting such causal interplay at various business cycles, which is useful for investors and policymakers.

Effect of International Commodity Price Shocks on Public Finances in Africa

This paper empirically investigates the macroeconomic responses to commodity price shocks with a focus on fiscal variables in a sample of thirty-three African commodity-dependent countries. Using the heterogeneous panel structural vector autoregressive (SVAR) approach developed by Pedroni, we find that government revenues as well as government expenditures react to commodity export prices shock. However, there is a large degree of heterogeneity across countries. Following country characteristics, we find that the response of fiscal variables is higher for countries dependent on extractive commodities than those dependent on agricultural ones. We also highlight the benefits of flexible exchange rate regimes for accommodating external shocks and ensuring macroeconomic stability, which in turn is beneficial to government revenue mobilization. Our results suggest that the African government should seize commodities as an opportunity and increase their efforts in revenue mobilization during price booms and make a productive investment to isolate their finances from commodity price collapses.

Impact of oil price and oil production on inflation in the CEMAC

There are different channels through which variations in international crude oil prices translate into changes in net-oil exporting countries' domestic prices. This article identifies two of these causal mechanisms, namely the pass-through effect and the Dutch disease effect. It intends to disentangle these two effects in the five oil producers of the Central African Economic and Monetary Community: Cameroon, the Republic of Congo, Chad, Equatorial Guinea, and Gabon. It also investigates the heterogeneity across countries in the face of international oil price and domestic oil production shocks based on a multiple time-series strategy covering the period 1995–2019. Applying Dynamic Ordinary Least Squares and Autoregressive Distributed Lag models, it concludes to the presence of a pass-through effect in Cameroon, Chad, and the Republic of Congo and of a Dutch disease effect in Equatorial Guinea. This contributes to the understanding of the relationships between international commodity prices and domestic consumer price variations but can also help policymakers in the CEMAC by assessing the vulnerability of its members toward external shocks.

International Commodity Price and Economy Growth: Panel Data Analysis in Sub- Saharan Africa

In the theoretical literature, the relationship between primary producer commodity prices and economic change has been confirmed. Therefore, this paper examines sub-Saharan African countries’ experiences pertaining to commodity price variation. The main purpose of this article is to examine the impact of commodity price instability in sub-Saharan Africa. To do so, panel data models are used to solve the problems of unobserved variables. The results reveal that the current growth of commodity prices has a positive effect on the growth of the economy. However, the logs of the lags and logs of the leads of the commodity price have negative impacts on the growth of the economy. That means that commodity price variations will continue to harm the economies of sub-Saharan African countries.