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A Barrel of Oil or a Bottle of Wine

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Author Info

  • Tahsin Saadi Sedik
  • Serhan Cevik

Abstract

This 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 Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/1.

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Length: 19
Date of creation: 01 Jan 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/1

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Related research

Keywords: Commodity prices; Oil; Agricultural commodities; Agricultural prices; Economic growth; Emerging markets; Oil prices; Oil sector; crude oil; oil demand; aggregate demand; crude oil prices; oil production; oil consumption; opec; oil supply; price fluctuations; crude oil production; oil market; output growth; econometric results; world economy; world oil demand; per capita income; oil shock; crude oil market; income elasticities; political economy; spot price; crude oil production data; capital flows; crude oil extraction; million barrels per day; nonrenewable resources; million barrels; oil extraction; energy information administration; market integration; domestic consumption; production level; econometric analysis; opec countries; global scale; international oil prices; petroleum exporting countries; exporting countries; organization of petroleum exporting countries;

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References

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  1. Martin Petri & Tahsin Saadi-Sedik, 2006. "To Smooth or Not to Smooth," IMF Working Papers 06/257, International Monetary Fund.
  2. Jean-Marie Cardebat & Jean-Marc Figuet, 2004. "What explains Bordeaux wine prices?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 293-296.
  3. David Coady & Javier Arze del Granado, 2010. "The Unequal Benefits of Fuel Subsidies," IMF Working Papers 10/202, International Monetary Fund.
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Citations

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Cited by:
  1. Alexandra Dwyer & George Gardner & Thomas Williams, 2011. "Global Commodity Markets - Price Volatility and Financialisation," RBA Bulletin, Reserve Bank of Australia, pages 49-58, June.
  2. Algieri, Bernardina, 2013. "A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price," Discussion Papers 145556, University of Bonn, Center for Development Research (ZEF).
  3. 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.

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