Working Paper: NBER ID: w20003
Authors: Ron Alquist; Saroj Bhattarai; Olivier Coibion
Abstract: Guided by a macroeconomic model in which commodity prices are endogenously determined, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity. The model yields a factor structure for commodity prices and identification conditions that provide the factors with an economic interpretation: one factor captures the combined contribution of shocks that affect commodity markets only through general-equilibrium forces. Applied to a cross-section of commodity prices since 1968, the theoretical restrictions are consistent with the data and yield structural interpretations of the common factors in commodity prices. Commodity-related shocks have contributed modestly to global economic fluctuations.
Keywords: Commodity Prices; Global Economic Activity; Macroeconomic Model; Factor-Based Identification
JEL Codes: E3; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| commodity price movements (Q02) | global economic activity (F69) |
| non-commodity shocks (Q02) | commodity price movements (Q02) |
| aggregate economic activity (E10) | commodity price movements (Q02) |
| commodity prices (Q02) | global economic fluctuations (F44) |