The Origins of Commodity Price Fluctuations

Evgenia Passari
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Evgenia Passari: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: We build novel indexes of commodity price developments by simulating news-reading. Our proposed computer-based, narrative approach is flexible, unified and spans the global commodity market, including energy, industrial and precious metals, and agricultural commodities. Empirical evidence and human readings of news articles indicate that our indexes capture commodity-price supply and demand components. Index-peaks track the post-crisis collapse of commodity markets, other market-specific developments, as well as the recent COVID-19 crisis. The richness of news content allows us to decompose the supply and demand indexes into a number of key determinants that shaped commodity markets since the beginning of the 21st century, including business cycle effects, geopolitical risk, natural disasters, and climate change considerations. Preliminary results reveal that the nature of commodity price movements matters for macroeconomic outcomes, firms' decisions, and asset prices.

Date: 2022-10
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Published in ACSS (Applied Computational Social Sciences)-PSL (Université Paris Sciences et Lettres) Institute Research Seminar, Oct 2022, Paris, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04717201

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