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Long-run prices of primary commodities and oil prices

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  • Kausik Chaudhuri

Abstract

Acutely volatile movements in primary commodity prices have drawn considerable interest from empirical researchers. Exports of these commodities account for the bulk of export earnings of developing countries. The traditional demand-based framework was unable to explain the marked deterioration in these prices during the 1980s. This paper tries to ascertain the role played by real oil prices in explaining the extremely volatile movements in real prices of primary commodities by taking into account oil price shocks over the period 1973-1996, using monthly data. Real primary commodity prices and real oil prices are cointegrated. Additionally, the error in the cointegrating relation stimulates real commodity price adjustment, not real oil price adjustment.

Suggested Citation

  • Kausik Chaudhuri, 2001. "Long-run prices of primary commodities and oil prices," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 531-538.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:531-538
    DOI: 10.1080/00036840122106
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    References listed on IDEAS

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    Cited by:

    1. Baffes, John, 2007. "Oil spills on other commodities," Resources Policy, Elsevier, vol. 32(3), pages 126-134, September.
    2. Mohcine Bakhat & Klaas WŸrzburg, 2013. "Co-integration of Oil and Commodity Prices: A Comprehensive ApproachAbstract," Working Papers fa05-2013, Economics for Energy.
    3. Logar, Ivana & van den Bergh, Jeroen C.J.M., 2013. "The impact of peak oil on tourism in Spain: An input–output analysis of price, demand and economy-wide effects," Energy, Elsevier, vol. 54(C), pages 155-166.
    4. Elissaios Papyrakis & Ohad Raveh, 2013. "An Empirical Analysis of a Regional Dutch Disease: The case of Canada," OxCarre Working Papers 106, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    5. John Baffes & Tassos Haniotis, 2016. "What Explains Agricultural Price Movements?," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 706-721, September.
    6. Cheng, Wan-Hsiu & Hung, Jui-Cheng, 2011. "Skewness and leptokurtosis in GARCH-typed VaR estimation of petroleum and metal asset returns," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 160-173, January.
    7. Yang, C. W. & Hwang, M. J. & Huang, B. N., 2002. "An analysis of factors affecting price volatility of the US oil market," Energy Economics, Elsevier, vol. 24(2), pages 107-119, March.
    8. Gardebroek, Cornelis & Hernandez, Manuel A., 2013. "Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets," Energy Economics, Elsevier, vol. 40(C), pages 119-129.
    9. Bhar, Ramaprasad & Hammoudeh, Shawkat, 2011. "Commodities and financial variables: Analyzing relationships in a changing regime environment," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 469-484, October.
    10. Marco Lombardi & Chiara Osbat & Bernd Schnatz, 2012. "Global commodity cycles and linkages: a FAVAR approach," Empirical Economics, Springer, vol. 43(2), pages 651-670, October.
    11. Mohcine Bakhat & Klaas WŸrzburg, 2013. "Price Relationships of Crude Oil and Food Commodities," Working Papers fa06-2013, Economics for Energy.
    12. World Bank Group, 2016. "Commodity Markets Outlook, July 2016," World Bank Publications, The World Bank, number 24735, July.
    13. Matteo Manera, Marcella Nicolini, and Ilaria Vignati, 2013. "Financial Speculation in Energy and Agriculture Futures Markets: A Multivariate GARCH Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    14. Zhang, Xun & Lai, K.K. & Wang, Shou-Yang, 2008. "A new approach for crude oil price analysis based on Empirical Mode Decomposition," Energy Economics, Elsevier, vol. 30(3), pages 905-918, May.
    15. Mohammadi, Hassan & Su, Lixian, 2010. "International evidence on crude oil price dynamics: Applications of ARIMA-GARCH models," Energy Economics, Elsevier, vol. 32(5), pages 1001-1008, September.
    16. Valeria Costantini & Francesco Gracceva, 2004. "Social Costs of Energy Disruptions," Working Papers 2004.116, Fondazione Eni Enrico Mattei.
    17. repec:bpj:jossai:v:2:y:2014:i:3:p:193-205:n:1 is not listed on IDEAS
    18. Elissaios Papyrakis & Ohad Raveh, 2014. "An Empirical Analysis of a Regional Dutch Disease: The Case of Canada," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(2), pages 179-198, June.
    19. repec:eee:jrpoli:v:55:y:2018:i:c:p:9-19 is not listed on IDEAS

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