IDEAS home Printed from
   My bibliography  Save this paper

Passing the Buck: Impacts of Commodity Price Shocks on Rural Outcomes


  • Grimes, Arthur
  • Hyland, Sean


Producers of agricultural commodities treat world commodity prices as exogenous. Prices facing regional producers can also be considered exogenous when we aggregate producers over small districts, and even across New Zealand. Through estimation of a vector autoregressive (VAR) model, under a minimal set of restrictions and through institutional knowledge, we estimate the causal impact of exogenous commodity price innovations on a set of community outcomes. We find the conventional approach of restricting the focus to national effects is insufficient to understand such dynamics, and future analysis and policy should consider sub-national responses. By extending the framework to a VAR on panel data covering all, or a sub-sample, of New Zealand TLSs over 1991-2011, we find that an increase in commodity prices leads to a permanent increase in housing investment and house prices across the country. However there is a significant degree of spatial distribution in effects. Contrary to our hypothesis, we find that rural communities are in fact the most insulated from commodity price shocks, with small and insignificant effects in both outcomes. Instead, due to constrained short-run rural employment and indirect redistribution through increased expenditure, it is urban areas that experience the most significant increases in housing investment, and the lion’s share of house price appreciation.

Suggested Citation

  • Grimes, Arthur & Hyland, Sean, 2012. "Passing the Buck: Impacts of Commodity Price Shocks on Rural Outcomes," 2012 Conference, August 31, 2012, Nelson, New Zealand 136046, New Zealand Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:nzar12:136046

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    2. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Arthur Grimes & Sean Hyland & Andrew Coleman & James Kerr & Alex Collier, 2013. "A New Zealand Regional Housing Model," Working Papers 13_02, Motu Economic and Public Policy Research.

    More about this item


    Agribusiness; Agricultural and Food Policy; Demand and Price Analysis; Environmental Economics and Policy; Land Economics/Use; Production Economics; Productivity Analysis;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:nzar12:136046. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.