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A long-commodity-cycle model of the world economy over a century and a half — Making bricks with little straw

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  • Le, Vo Phuong Mai
  • Meenagh, David
  • Minford, Patrick

Abstract

This paper explores the world business cycle using unfiltered data from 1870 and looks for a theory that could account for the long wave commodity cycle in the world economy. We build a simple DSGE model that includes a long time-to-build constraint in the commodity sector. We find that this model can produce long cycles in output and commodity prices as introduced by Kontradieff (1925) and Schumpeter (1934). Our findings show that these long business cycles are produced by the long gestation of commodity capacity which causes very large swings in commodity prices.

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  • Le, Vo Phuong Mai & Meenagh, David & Minford, Patrick, 2019. "A long-commodity-cycle model of the world economy over a century and a half — Making bricks with little straw," Energy Economics, Elsevier, vol. 81(C), pages 503-518.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:503-518
    DOI: 10.1016/j.eneco.2019.04.011
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    Cited by:

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    2. Das, Khanindra Ch & Mahalik, Mantu Kumar & Sadorsky, Perry, 2023. "Tax provision by international subsidiaries of Indian extractive industry multinationals: Do environmental pollution and corruption matter?," Resources Policy, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Long waves; Commodities; DSGE model; Indirect Inference;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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