EconPapers    
Economics at your fingertips  
 

Commodity Prices and Global Economic Activity: a derived-demand approach

Angelo Duarte, Wagner Gaglianone (), Osmani Guillén and João Issler

No 539, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: In this paper, a derived-demand approach is proposed to explain the positive correlation and the synchronicity between the growth rates of commodity prices and of economic activity at the global level. The focus is on important traded commodities, whose supply function is very price inelastic in the short run, such as oil and major metal commodities. The paper contributions are as follows. First, the synchronicity of oil-price and global activity cycles is presented using the tools of the common-feature literature. Second, it is shown how to improve forecasts of global activity using commodity prices, noting that one observes the latter at an almost continuous-time basis, but the former at a much lower frequency and with considerable delay. Third, the usefulness of optimal forecast combinations for oil prices is discussed employing a wide array of macroeconomic and financial variables. The out-of-sample R2 statistic for model combinations can reach up to about 14%, a major improvement over the previous literature.

Date: 2020-11
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.bcb.gov.br/pec/wps/ingl/wps539.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:bcb:wpaper:539

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Francisco Marcos Rodrigues Figueiredo ().

 
Page updated 2021-04-12
Handle: RePEc:bcb:wpaper:539