World Commodity Prices Research Articles

Determinants of Argentina's External Trade

Following the liberalization reforms of the late 80s and early 90s, several emerging market economies have experienced large and persistent trade deficits. This paper focuses on the Argentine experience, examining the extent to which trade imbalances in the 1990s resulted from income and relative price movements, as well as from shifts in foreign trade elasticities associated with structural changes. New estimates of export and import equations are presented using a broader set of variables than previous studies and distinguishing between intra and extra MERCOSUR trade. We find that considerable export sensitivity to world commodity prices, domestic absorption, and economic activity in Brazil, combined with a high income elasticity of imports, are key determinants of Argentina's trade balance.

Preventing Crisis and Contagion: Fiscal and Financial Dimensions

Recent economic developments highlight Latin America's vulnerability to economic and financial turmoil that is triggered by events in distant corners of the globe. The Asian financial crisis that began in 1997 and the more recent Russian crisis have left the region profoundly shaken, and living in fear of a full-scale collapse. This contagion has occurred through a number of channels. The collapse of Asian demand has contributed to the recent slide in world commodity prices, cutting into the commodity-dependent region's export income and undermining the public finances in a number of countries. The Russian devaluation has raised the spectre of sovereign default, making investors around the globe more wary of increasing their cross-border exposure. The financial crises in Asia and Russia have also severely undermined balance sheets of emerging-market investors, reducing their capacity to invest in the region, and forcing them into fire sales of their Latin American investments. In this paper we lay out the fiscal and financial policies that can help protect economies from the kind of global financial turbulence the world is now experiencing. Exchange rate policies are discussed in a separate paper.

Will the Emergence of the Euro Affect World Commodity Prices?

This study provides evidence that episodes of internal stability of exchange rates among the 11 Euro countries during 1957-98 were associated with periods of lower real commodity price volatility. These stabilizing effects are statistically significant for fertilizer, metals, petroleum, and cereals. A reasonable inference, therefore, is that the establishment of the Euro on January 1, 1999, should be expected to contribute to reduced volatility of world commodity prices, other things equal, although the impacts are likely to be modest.

Will the Emergence of the Euro Affect World Commodity Prices?

This study provides evidence that episodes of internal stability of exchange rates among the 11 Euro countries during 1957-98 were associated with periods of lower real commodity price volatility. These stabilizing effects are statistically significant for fertilizer, metals, petroleum, and cereals. A reasonable inference, therefore, is that the establishment of the Euro on January 1, 1999, should be expected to contribute to reduced volatility of world commodity prices, other things equal, although the impacts are likely to be modest.

The ERM Effect, Conflict and Inflation in the European Union

This paper investigates price inflation expectations and wage determination in the ERM member countries with the aim of assessing the importance of the ERM effect and distributional conflict. We have found strong evidence of an ERM effect in the inflationary process of participating countries, but this effect manifests itself primarily through structural changes in labour markets rather than through importing Bundesbank's reputation. This evidence questions the tendency to model the ERM as a credibility-reputation game. Inflation expectations for all ERM countries are strongly influenced by movements in unit labour costs and demand, and secondarily by world commodity and oil prices. The empirical results provide strong support for the conflict approach to wage inflation.

How Persistent Are Shocks to World Commodity Prices?

This paper examines the persistence of shocks to world commodity prices, using monthly IMF data on primary commodities between 1957-98. We find that shocks to commodity prices are typically long-lasting and the variability of the persistence of price shocks is quite wide. The paper also discusses the implications of these findings for national and international schemes to stabilize earnings from commodity exports and finds that if price shocks are long-lived, then the cost of stabilization schemes will likely exceed any associated smoothing benefits.

Review On The Export Promotion Policies Launched By The Colombian Government. 1967-1980

Colombia initiated in 1959 a successful and outrageous structural transformation oriented to encourage diversification of the productive capacity of the country implying defense of world commodity prices, higher rate of industrialization process and the promotion of exports. Government oriented export promotion of tradable goods other than coffee, gold and oil industry, becoming a success history in the promotion of country's export lead growth. State straightens this definitive change of development model intervening practically every economic variable to encourage a different accumulation process. Government mediated the foreign exchange market mechanism to preserve purchasing power parity of exports after a severe program of mandatory rules to rationalize foreign reserves. Balance of payments returned to dynamic equilibrium and massive amount of country's savings were oriented to diversify the economy, and promote exports benefiting this activity via PROEXPO-credit resources and CAT-tax exempting Colombian higher value added exports other than coffee. Imported capital goods and inputs were also encouraged via drawback mechanisms. Economic integration with Andean bloc countries followed and marketing government promoting agency located in main importing countries transformed secular Colombian inward mentality.

Commodity markets: Supply cuts drive up the price of oil

World commodity prices are again showing a marked upward trend. Most pronounced has been the rise in oil prices which have doubled as a result of a new round of production cuts. Is this the beginning of a general turnaround on the commodity markets?

Some issues affecting the macroeconomic environment for the agricultural and resource sectors: the case of fiscal policy

The impact of structural changes in fiscal policy on macroeconomic stability in Australia and other developed economies since the mid‐1970s is assessed. The evidence points to a destabilising influence from fiscal policy from the mid‐1970s to the mid‐1980s, with a more stabilising influence since then. Within Australia, there is some evidence that structural changes to fiscal policy may have helped to stabilise interest rates and the real exchange rate over the period since the mid‐1980s. However, this stabilising influence on the real exchange rate may have reduced the extent to which real exchange rate movements have countervailed world commodity price changes in Australian dollar terms.

Determinants of Argentina's External Trade

This paper presents new estimates of export and import equations for Argentina, using a broader set of variables than previous studies and distinguishing between intra- and extra-MERCOSUR trade. It measures the importance of relative price versus income effects in accounting for the higher trade deficit during the 1990s, and examines whether foreign trade elasticities have increased as a result of structural changes in the economy. It finds that the high income elasticity of imports and the responsiveness of exports to changes in world commodity prices, domestic absorption, and economic activity in Brazil have been key determinants of Argentina’s trade balance.

Booms and Slumps in World Commodity Prices

This paper examines the duration and magnitude of cycles in commodity prices. We find that for the majority of commodities, price slumps last longer than price booms. How far prices fall in a slump is found to be slightly larger than how far they tend to rebound in a subsequent boom. We also find little evidence of a consistent `shape' to cycles in commodity prices. For all commodities, the probability of an end to a slump in prices is independent of the time already spent in the slump, and for most commodities, the probability of an end to a boom in prices is independent of the time already spent in the boom.

Booms and Slumps in World Commodity Prices

This paper examines the duration and magnitude of commodity-price cycles. It finds that for most commodities, price slumps last longer than price booms. How far prices fall in a slump is found to be slightly larger than how far they rebound in a subsequent boom. There is little evidence of a consistent ‘shape’ to commodity-price cycles. For all commodities, the probability of an end to a slump in prices is independent of the time already spent in the slump, and for most commodities, the probability of an end to a boom in prices is independent of the time already spent in the boom.

Determinants of Argentina's External Trade

This paper presents new estimates of export and import equations for Argentina, using a broader set of variables than previous studies and distinguishing between intra- and extra-MERCOSUR trade. It measures the importance of relative price versus income effects in accounting for the higher trade deficit during the 1990s, and examines whether foreign trade elasticities have increased as a result of structural changes in the economy. It finds that the high income elasticity of imports and the responsiveness of exports to changes in world commodity prices, domestic absorption, and economic activity in Brazil have been key determinants of Argentina`s trade balance.

Preventing Crisis and Contagion: Fiscal and Financial Dimensions

Recent economic developments highlight Latin America's vulnerability to economic and financial turmoil that is triggered by events in distant corners of the globe. The Asian financial crisis that began in 1997 and the more recent Russian crisis have left the region profoundly shaken, and living in fear of a full-scale collapse. This contagion has occurred through a number of channels. The collapse of Asian demand has contributed to the recent slide in world commodity prices, cutting into the commodity-dependent region's export income and undermining the public finances in a number of countries. The Russian devaluation has raised the spectre of sovereign default, making investors around the globe more wary of increasing their cross-border exposure. The financial crises in Asia and Russia have also severely undermined balance sheets of emerging-market investors, reducing their capacity to invest in the region, and forcing them into fire sales of their Latin American investments. In this paper we lay out the fiscal and financial policies that can help protect economies from the kind of global financial turbulence the world is now experiencing. Exchange rate policies are discussed in a separate paper.

How Persistent Are Shocks to World Commodity Prices?

This paper examines the persistence of shocks to world commodity prices, using monthly IMF data on primary commodities between 1957–98. We find that shocks to commodity prices are typically long–lasting and the variability of the persistence of price shocks is quite wide. The paper also discusses the implications of these findings for national and international schemes to stabilize earnings from commodity exports and finds that if price shocks are long–lived, then the cost of stabilization schemes will likely exceed any associated smoothing benefits.

How Persistent are Shocks to World Commodity Prices?

This paper examines the persistence of shocks to world commodity prices, using monthly IMF data on primary commodities between 1957-98. We find that shocks to commodity prices are typically long-lasting and the variability of the persistence of price shocks is quite wide. The paper also discusses the implications of these findings for national and international schemes to stabilize earnings from commodity exports and finds that if price shocks are long-lived, then the cost of stabilization schemes will likely exceed any associated smoothing benefits.

Ravaging the poor: the International Monetary Fund indicted by its own data.

Recent International Monetary Fund studies on the impact of its structural adjustment programs on the poorest nations reveal that most have stagnated or declined economically. The IMF's requirement that these countries increase exports despite falling world commodity prices has been a principal cause of their economic malaise. Meanwhile, IMF loan conditions demanding lower government expenditures have led to sharp reductions in general social spending, from which the wealthiest quintile of the population receives a disproportionately larger share of outlays for health and education.

Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years

The early literature on international trade has debated extensively the constraints facing exporting countries in the major commodity markets. This article goes one step further by suggesting that the final demand for these products could not have increased because the declines in world commodity prices were not transmitted or were transmitted imperfectly to domestic consumer prices. In contrast, upward movements in world prices were clearly passed on to domestic prices. As a result, the spread between world and domestic prices almost doubled in all major commodity markets during 1975–94. This asymmetry, seldom discussed in the literature, does not seem to be caused, at least systematically, by changes in trade and tax policies or factors such as transport, processing, and marketing costs. This article argues, therefore, that a special effort should be made to better understand the transmission from world to domestic prices, especially the role of large international trading companies that may have the capability to influence such spreads through one or several stages of processing in most major commodity markets.

World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence from the United Kingdom

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.

World Commodity Prices As a Forecasting tool for Retail Prices: Evidence From the United Kingdom

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.