Macroeconomics, geopolitical risk, and resource commodity price bubbles

Beibei Li, Yiming Chen, Haipeng Wu and Xuefeng Mao

Resources Policy, 2025, vol. 101, issue C

Abstract: The pivotal role of resource commodities in economic development has heightened attention to price volatility and the resultant price bubble phenomenon. The Generalized Supremum Augmented Dickey-Fuller (GSADF) method is employed to identify explosive episodes in four resource commodities—crude oil, copper, soybeans, and cotton. Furthermore, a rare-event logit model is used to examine the factors influencing these boom-bust episodes. The empirical results reveal multiple price bubbles across the four resource commodity markets from January 1980 to July 2022. The risk of market bubbles is highest in copper, followed by crude oil, cotton, and soybeans. Results for the driving forces of bubbles show that the exuberance and collapse of bubble behavior can be attributed to microeconomic factors and geopolitics. Specifically, global economic expansion and dollar depreciation significantly increase the likelihood of price bubbles. Geopolitical risk exerts a significant influence on price bubbles, which are more likely to be propagated through specific geopolitical acts (GPA) than through geopolitical threats (GPT). Our findings shed new light on the nature and formation of bubbles in the resource commodity markets, providing valuable guidance for policymakers and investors in making informed decisions regarding price management and investment strategies.

Keywords: Resource commodity; Price bubbles; Macroeconomics; Geopolitical risk (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420725000200
Full text for ScienceDirect subscribers only

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:eee:jrpoli:v:101:y:2025:i:c:s0301420725000200

DOI: 10.1016/j.resourpol.2025.105478

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().