Advanced Search
MyIDEAS: Login

Growth in Emerging Market Economies and the Commodity Boom of 2003–2008: Evidence from Growth Forecast Revisions

Contents:

Author Info

  • Elif C. Arbatli
  • Garima Vasishtha

Abstract

Demand for industrial raw materials from emerging economies, particularly emerging Asia, is widely believed to have fueled the surge in oil and industrial commodity prices during 2002-2008. The paper first presents a simple storage model in which commodity prices respond to market participant’s changing expectations of the future macroeconomic environment. In the model, the change in the price of a commodity depends on the unanticipated changes in demand factors, along with the real exchange rate, the real interest rate, and other factors that affect the marginal convenience yield. It then focuses on the role of demand factors by using a newly constructed monthly measure of unanticipated demand shocks for commodities based on revisions to professional forecasts of industrial production growth for a large group of emerging market and advanced economies. The empirical framework also controls for other macroeconomic factors that affect commodity prices, such as the real effective exchange rate (REER) of the U.S. dollar and the real interest rate. The results show that revisions to growth forecasts for emerging Asia play an important role in explaining movements in the real prices of industrial metals. In addition, the REER of the U.S. dollar is an important determinant of industrial commodity prices. For crude oil, growth forecast revisions for the U.S. and the real interest rate play a significant role in explaining real prices. Furthermore, growth surprises in general fall short of explaining the fast run-up in most commodity prices during 2006-2008, and the magnitude of the collapse in prices during the recent global financial crisis.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bankofcanada.ca/wp-content/uploads/2012/02/wp2012-08.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 12-8.

as in new window
Length: 36 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bca:bocawp:12-8

Contact details of provider:
Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

Related research

Keywords: Econometric and statistical methods; International topics;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:12-8

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.