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

Author

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  • Jair N. Ojeda-Joya

    (Banco de la República de Colombia)

  • Oscar Jaulin-Mendez

    (Banco de la República de Colombia)

  • Juan C. Bustos-Peláez

    (Universidad Nacional de Colombia)

Abstract

We study the interdependence between real commodity prices and world real GDP using long-term annual data since 1870, by performing two empirical exercises. First, we compute long-term and medium-term cycles and measure their degree of synchronization for different leads and lags. Second, we perform several causality tests in order to better understand the nature of their interdependence. Our results show that GDP and commodity-price cycles are correlated, and there is evidence of short-term causality between them. However, there is no evidence of Granger causality from GDP to medium and long term cycles of commodity prices. This finding is consistent with the technology-based theories of commodity-price cycles. Searching for a supply-side determinant, we study the interdependence between oil-price and the remaining commodity-price cycles. Our results imply that oil prices are key drivers of metal price cycles for all fluctuation frequencies.

Suggested Citation

  • Jair N. Ojeda-Joya & Oscar Jaulin-Mendez & Juan C. Bustos-Peláez, 2015. "The Interdependence between Commodity-Price and GDP Cycles: A Frequency Domain Approach," Borradores de Economia 913, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:913
    DOI: 10.32468/be.913
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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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