Emerging Asia's Impact on Food and Oil Prices: A Model-Based Analysis
AbstractThe authors explore the usefulness of macroeconomic models in analyzing global economic developments by examining movements in commodity prices between July 2007 and July 2008. They use the Bank of Canada's version of the Global Economy Model and investigate the longerterm outlook for commodity prices by constructing two different, globally consistent, scenarios for emerging Asia. In the first scenario, the authors assume that a persistent increase in emerging Asia's productivity underlies its sustained growth; in the second scenario, they assume that a combination of productivity increases and a temporary demand shock underlie its growth. The demand for commodities increases in both scenarios, but, by comparing the two, the authors reveal that each scenario has considerably different economic implications. Allowing for the possibility that a small share of emerging Asia's growth might be fuelled by a temporary demand shock generates a strong "boom-bust" outcome for emerging Asia, and amplifies the volatility in commodity markets. The authors also investigate the possibility that emerging markets react to inflation by revaluing their exchange rates by 10 per cent. This affects the outlook for commodities only marginally.
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Bibliographic InfoPaper provided by Bank of Canada in its series Discussion Papers with number 09-3.
Length: 30 pages
Date of creation: 2009
Date of revision:
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International topics; Recent economic and financial developments;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-14 (All new papers)
- NEP-BEC-2009-02-14 (Business Economics)
- NEP-ENE-2009-02-14 (Energy Economics)
- NEP-MAC-2009-02-14 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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