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Commodity-price comovement and global economic activity

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  • Alquist, Ron
  • Bhattarai, Saroj
  • Coibion, Olivier

Abstract

Guided by a macroeconomic model with endogenous commodity prices, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity. The model yields a factor structure for commodity prices and identification conditions that provide an economic interpretation: one factor captures the combined contribution of shocks that affect commodity markets only through general-equilibrium forces. Applied to a cross-section of commodity prices since 1968, the theoretical restrictions are consistent with the data and yield structural interpretations of the common factors in commodity prices. Commodity-related shocks have contributed modestly to global economic fluctuations.

Suggested Citation

  • Alquist, Ron & Bhattarai, Saroj & Coibion, Olivier, 2020. "Commodity-price comovement and global economic activity," Journal of Monetary Economics, Elsevier, vol. 112(C), pages 41-56.
    • Handle: RePEc:eee:moneco:v:112:y:2020:i:c:p:41-56
    DOI: 10.1016/j.jmoneco.2019.02.004
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    More about this item

    Keywords

    Commodity prices; Factor models; Business cycles;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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