Working Paper: NBER ID: w27589
Authors: Andrés Fernández; Stephanie Schmitt-Grohé; Martín Uribe
Abstract: This paper investigates empirically the role of the commodity price super cycle in explaining real activity in developed and emerging economies. The commodity price super cycle is defined as a common permanent component in real commodity prices. Estimates using quarterly and annual data from 1960 to 2018 indicate that world shocks that affect commodity prices and the world interest rate explain more than half of the variance of output growth on average across countries. However, the majority of this contribution, more than two thirds, stems from stationary world shocks. These results suggest that world disturbances that are responsible for low frequency movements in commodity prices play an important but not dominant role in driving fluctuations in aggregate activity at the country level.
Keywords: Commodity Price Super Cycle; Economic Activity; World Shocks; Developed Economies; Emerging Economies
JEL Codes: F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| World shocks affecting commodity prices (Q02) | Output growth (O40) |
| Stationary world shocks (E32) | Output growth (O40) |
| Commodity price super cycle (Q02) | Output growth (O40) |
| Transitory components of commodity prices (Q02) | Output growth (O40) |
| Stationary world shocks (E32) | Output fluctuations (E39) |
| Permanent world shock (F69) | Output fluctuations (E39) |