Global Commodity Markets and Sovereign Risk across 150 Years

Angélica Domínguez-Cardoza, Adelina Garamow and Josefin Meyer

No 2020, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: How do commodity price movements affect sovereign default risk over the long-run? Using a novel dataset covering 41 countries and 42 raw commodities, we take a comprehensive long-run view to shed light on this so far understudied relationship between commodity risk and sovereign risk across 150 years. We create a novel country-specific commodity price index that allows us to take advantage of countries’ variation in their commodity export compositions. Our results are twofold: first, commodity price fluctuations show a persistent association with sovereign borrowing costs for countries that are commodity export dependent across the last one and a half centuries. Second, historically this relationship was driven by agricultural price movements; today it is driven by mineral and energy price movements.

Keywords: Sovereign Risk; commodity prices (search for similar items in EconPapers)
JEL-codes: E44 F34 F41 G12 H63 (search for similar items in EconPapers)
Pages: 45 p.
Date: 2022
New Economics Papers: this item is included in nep-agr, nep-fdg, nep-his, nep-opm and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp2020

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