A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices?

Tahsin Saadi Sedik () and Serhan Cevik

No 2011/001, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.

Keywords: WP; price; commodity; commodity price; emerging market economy; demand; Commodity prices; Oil; Wine; Comovement; Global growth; Emerging economies; wine price; crude oil; price fluctuation; price pressure; oil price regression; Oil prices; Emerging and frontier financial markets; Excess liquidity; Global (search for similar items in EconPapers)
Pages: 19
Date: 2011-01-01
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Citations: View citations in EconPapers (10)

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Journal Article: A Barrel of Oil or a Bottle of Wine: How Do Global Growth Dynamics Affect Commodity Prices?* (2014)
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