What Drives Commodity Price Booms and Busts?

HKIMR Working Paper No.23/2018

45 Pages Posted: 4 Nov 2018

See all articles by David S. Jacks

David S. Jacks

Simon Fraser University (SFU) - Department of Economics; National Bureau of Economic Research (NBER)

Martin Stuermer

Federal Reserve Bank of Dallas, Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: October 12, 2018

Abstract

We provide evidence on the dynamic effects of aggregate commodity demand shocks, commodity supply shocks, and storage or other commodity-specific demand shocks on real commodity prices. We analyze a new dataset of price and production levels from 1870 to 2015 for 15 grains, metals, and soft commodities, representing nearly $2.5 trillion in annual gross value of production. We establish that commodity demand shocks strongly dominate commodity supply shocks in driving prices over a broad set of commodities and over a long period of time. Furthermore, while commodity demand shocks have increased in importance over time, commodity supply shocks have become less relevant.

Keywords: Commodity prices, natural resources, structural VAR

JEL Classification: E30, N50, Q31

Suggested Citation

Jacks, David S. and Stuermer, Martin, What Drives Commodity Price Booms and Busts? (October 12, 2018). HKIMR Working Paper No.23/2018, Available at SSRN: https://ssrn.com/abstract=3265115 or http://dx.doi.org/10.2139/ssrn.3265115

David S. Jacks (Contact Author)

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Martin Stuermer

Federal Reserve Bank of Dallas, Research Department ( email )

2200 N. Pearl St
Dallas, TX 75201
United States

HOME PAGE: http://https://sites.google.com/site/mstuermer1/

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