Does the Commodity Super Cycle Matter?

34 Pages Posted: 28 Jul 2020 Last revised: 21 May 2021

See all articles by Andrés Fernández

Andrés Fernández

Inter-American Development Bank (IDB)

Stephanie Schmitt-Grohé

Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Martín Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2020

Abstract

This paper investigates empirically the role of the commodity price super cycle in explaining real activity in developed and emerging economies. The commodity price super cycle is defined as a common permanent component in real commodity prices. Estimates using quarterly and annual data from 1960 to 2018 indicate that world shocks that affect commodity prices and the world interest rate explain more than half of the variance of output growth on average across countries. However, the majority of this contribution, more than two thirds, stems from stationary world shocks. These results suggest that world disturbances that are responsible for low frequency movements in commodity prices play an important but not dominant role in driving fluctuations in aggregate activity at the country level.

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Suggested Citation

Fernández, Andrés and Schmitt-Grohe, Stephanie and Uribe, Martin, Does the Commodity Super Cycle Matter? (July 2020). NBER Working Paper No. w27589, Available at SSRN: https://ssrn.com/abstract=3661081

Andrés Fernández (Contact Author)

Inter-American Development Bank (IDB) ( email )

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Stephanie Schmitt-Grohe

Centre for Economic Policy Research (CEPR) ( email )

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National Bureau of Economic Research (NBER)

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Martin Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

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