Passing the Buck: Impacts of Commodity Price Shocks on Local Outcomes

Arthur Grimes and Sean Hyland

No 291382, Motu Working Papers from Motu Economic and Public Policy Research

Abstract: The extent to which exogenous international agricultural price fluctuations are internalised by rural communities is of major interest for policy-makers concerned with regional economic performance. So too is the link between rural sector performance and urban outcomes, especially in agriculturally-based economies. Through vector autoregressive (VAR) modelling we estimate the causal effect of exogenous commodity price innovations on both rural and urban community outcomes. Our analysis demonstrates that restricting the focus to national effects may lead to incorrect inference. We therefore extend the analysis to a VAR using panel data covering all New Zealand districts over 1991–2011. House prices and housing investment are used as quarterly indicators of regional economic and population outcomes. By exploiting the variation in production bundles across communities we find that an increase in commodity prices leads to a permanent increase in housing investment and house prices across the country. However, we find that rural communities are relatively insulated from commodity price shocks, whereas urban areas are most affected by commodity price shocks. We discuss the reasons why this paradoxical result may arise.

Keywords: Agricultural and Food Policy; Community/Rural/Urban Development (search for similar items in EconPapers)
Pages: 46
Date: 2013-09
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/291382/files/13_10.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:motuwp:291382

DOI: 10.22004/ag.econ.291382

Access Statistics for this paper

More papers in Motu Working Papers from Motu Economic and Public Policy Research Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().