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The Interdependence Between Commodity-Price and GDP Cycles: A Frequency-Domain Approach

Author

Listed:
  • Jair N. Ojeda-Joya

    (Banco de la Republica)

  • Oscar Jaulin-Mendez

    (Banco de la Republica)

  • Juan C. Bustos-Peláez

    (Université Paris-Dauphine)

Abstract

In this paper, the interdependence between aggregate commodity prices and world gross domestic product (GDP) is studied by performing two empirical exercises with long-run data that starts in the nineteenth century. Long−term and medium-term cycles are computed and their degree of synchronization measured for different leads and lags. Causality tests are performed on the frequency domain. Both exercises deepen understanding of these macroeconomic relationships by disentangling them on the time and frequency dimensions, respectively. The results show evidence of cycle synchronization only in the case of super cycles. There is causality evidence from GDP to aggregate commodity prices mostly for long-run frequencies. Therefore, commodity-price trends and super-cycles are demand driven. There is causality evidence between oil-prices and GDP in both causation directions. However, oil-price fluctuations are predictive of GDP for business-cycle frequencies only. Overall, a frequency-domain approach is useful for identifying significant variation in the interdependence between commodity prices and GDP across fluctuation horizons.

Suggested Citation

  • Jair N. Ojeda-Joya & Oscar Jaulin-Mendez & Juan C. Bustos-Peláez, 2019. "The Interdependence Between Commodity-Price and GDP Cycles: A Frequency-Domain Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 275-292, September.
  • Handle: RePEc:kap:atlecj:v:47:y:2019:i:3:d:10.1007_s11293-019-09635-4
    DOI: 10.1007/s11293-019-09635-4
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    More about this item

    Keywords

    Medium-term cycles; Commodity prices; Frequency domain; Super cycles;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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