Passing the Buck: Impacts of Commodity Price Shocks on Local Outcomes
The extent to which exogenous international agricultural price fluctuations are internalised by rural communities is of major interest for policy-makers concerned with regional economic performance. So too is the link between rural sector performance and urban outcomes, especially in agriculturally-based economies. Through vector autoregressive (VAR) modelling we estimate the causal effect of exogenous commodity price innovations on both rural and urban community outcomes. Our analysis demonstrates that restricting the focus to national effects may lead to incorrect inference. We therefore extend the analysis to a VAR using panel data covering all New Zealand districts over 1991–2011. House prices and housing investment are used as quarterly indicators of regional economic and population outcomes. By exploiting the variation in production bundles across communities we find that an increase in commodity prices leads to a permanent increase in housing investment and house prices across the country. However, we find that rural communities are relatively insulated from commodity price shocks, whereas urban areas are most affected by commodity price shocks. We discuss the reasons why this paradoxical result may arise.
|Date of creation:||Sep 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Level 1, 97 Cuba Street, P.O. Box 24390, Wellington|
Web page: http://www.motu.org.nz
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Richard Hornbeck, 2012.
"The Enduring Impact of the American Dust Bowl: Short- and Long-Run Adjustments to Environmental Catastrophe,"
American Economic Review,
American Economic Association, vol. 102(4), pages 1477-1507, June.
- Richard Hornbeck, 2009. "The Enduring Impact of the American Dust Bowl: Short and Long-run Adjustments to Environmental Catastrophe," NBER Working Papers 15605, National Bureau of Economic Research, Inc.
- Hornbeck, Richard A., 2012. "The Enduring Impact of the American Dust Bowl: Short- and Long-Run Adjustments to Environmental Catastrophe," Scholarly Articles 11303325, Harvard University Department of Economics.
- Bourassa, Steven C. & Hoesli, Martin & Sun, Jian, 2006.
"A simple alternative house price index method,"
Journal of Housing Economics,
Elsevier, vol. 15(1), pages 80-97, March.
- Renée Fry & Adrian Pagan, 2011.
"Sign Restrictions in Structural Vector Autoregressions: A Critical Review,"
Journal of Economic Literature,
American Economic Association, vol. 49(4), pages 938-60, December.
- Renee Fry & Adrian Pagan, 2010. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," NCER Working Paper Series 57, National Centre for Econometric Research.
- Renee Fry & Adrian Pagan, 2010. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," CAMA Working Papers 2010-22, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Richard Hornbeck & Pinar Keskin, 2012.
"Does Agriculture Generate Local Economic Spillovers? Short-run and Long-run Evidence from the Ogallala Aquifer,"
NBER Working Papers
18416, National Bureau of Economic Research, Inc.
- Richard Hornbeck & Pinar Keskin, 2015. "Does Agriculture Generate Local Economic Spillovers? Short-Run and Long-Run Evidence from the Ogallala Aquifer," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 192-213, May.
- JunJie Wu & Munisamy Gopinath, 2008. "What Causes Spatial Variations in Economic Development in the United States?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 392-408.
- Kose, M. Ayhan, 2002. "Explaining business cycles in small open economies: 'How much do world prices matter?'," Journal of International Economics, Elsevier, vol. 56(2), pages 299-327, March.
- Arthur Grimes & David C. Maré & Melanie Morten, 2006. "Defining Areas: Linking Geographic Data in New Zealand," Working Papers 06_07, Motu Economic and Public Policy Research.
- Grimes, Arthur, 2006.
"A Smooth Ride: Terms of Trade, Volatility and GDP Growth,"
06/4, Ministry of Economic Development, New Zealand.
- Grimes, Arthur, 2006. "A smooth ride: Terms of trade, volatility and GDP growth," Journal of Asian Economics, Elsevier, vol. 17(4), pages 583-600, October.
- Gozgor, Giray, 2011. "Panel unit root tests of purchasing power parity hypothesis: Evidence from Turkey," MPRA Paper 34370, University Library of Munich, Germany.
- Luis Felipe Céspedes & Andrés Velasco, 2012.
"Macroeconomic Performance During Commodity Price Booms and Busts,"
IMF Economic Review,
Palgrave Macmillan;International Monetary Fund, vol. 60(4), pages 570-599, December.
- Luis Felipe Céspedes & Andrés Velasco, 2012. "Macroeconomic Performance During Commodity Price Booms and Busts," NBER Working Papers 18569, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:mtu:wpaper:13_10. 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: (Maxine Watene)
If references are entirely missing, you can add them using this form.