A Barrel of Oil or a Bottle of Wine
AbstractThis paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/1.
Date of creation: 01 Jan 2011
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-02-26 (Agricultural Economics)
- NEP-ALL-2011-02-26 (All new papers)
- NEP-CWA-2011-02-26 (Central & Western Asia)
- NEP-ENE-2011-02-26 (Energy Economics)
- NEP-OPM-2011-02-26 (Open Economy 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.:
- Martin Petri & Tahsin Saadi-Sedik, 2006. "To Smooth or Not to Smooth," IMF Working Papers 06/257, International Monetary Fund.
- David Coady & Javier Arze del Granado, 2010. "The Unequal Benefits of Fuel Subsidies," IMF Working Papers 10/202, International Monetary Fund.
- Jean-Marie Cardebat & Jean-Marc Figuet, 2004. "What explains Bordeaux wine prices?," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(5), pages 293-296.
- Alexandra Dwyer & George Gardner & Thomas Williams, 2011. "Global Commodity Markets - Price Volatility and Financialisation," RBA Bulletin, Reserve Bank of Australia, Reserve Bank of Australia, pages 49-58, June.
- Diego Bastourre & Jorge Carrera & Javier Ibarlucia & Mariano Sardi, 2012. "Common Drivers in Emerging Market Spreads and Commodity Prices," BCRA Working Paper Series 201257, Central Bank of Argentina, Economic Research Department.
- Algieri, Bernardina, 2013. "A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price," Discussion Papers, University of Bonn, Center for Development Research (ZEF) 145556, University of Bonn, Center for Development Research (ZEF).
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