The Impact of Commodity Market on the Economy of Developing Countries

Emon Chowdhury

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the impact of commodity markets on the economies of developing countries. Commodity markets play a crucial role in shaping the economic landscape of these nations by contributing to export earnings, GDP, and overall economic growth. However, the impact is not straightforward, as price volatility and fluctuations pose risks to commodity-dependent economies. Reliance on commodities hampers investment diversification, technological progress, and human capital development. Successful examples of economic transformation through diversification and innovation can guide developing countries, but challenges arise from corruption, political instability, and inadequate institutions. Factors influencing the evolution of commodity markets in developing countries include population and income growth, technological innovation, globalization, and trade liberalization. Despite challenges, opportunities exist through technological advancements, diversification, regional integration, and sustainable production practices. The impact of commodity markets on economic growth is complex, with both positive and negative effects, as exemplified by diverse outcomes among different regions and groups of countries. To promote sustained economic growth, developing countries should diversify their economies, invest in other sectors, and prioritize innovation and human capital development.

Keywords: Commodity markets; Developing countries; Economic growth; Price volatility; Diversification (search for similar items in EconPapers)
JEL-codes: F1 H3 H30 K2 (search for similar items in EconPapers)
Date: 2023-11-10, Revised 2023-12-05
New Economics Papers: this item is included in nep-gro
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Forthcoming in Bazaar Parikrama 35.12(2023): pp. 8-23

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