A Barrel of Oil or a Bottle of Wine: How do Global Growth Dynamics Affect Commodity Prices?

20 Pages Posted: 1 Feb 2011

See all articles by Serhan Cevik

Serhan Cevik

International Monetary Fund (IMF)

Tahsin Saadi-Sedik

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2011

Abstract

This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010 Analyzing two very distinct commodities-crude oil and fine wine, we find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is the key factor. The empirical results show that while advanced economies account for more than half of global consumption, emerging economies make up the bulk of the incremental change in demand, thereby having a greater weight in commodity price formation. The results also show that the shift in the composition of aggregate commodity demand is a recent phenomenon.

Keywords: Agricultural commodities, Agricultural prices, Commodity price fluctuations, Consumption, Demand, Economic growth, Emerging markets, International liquidity, Oil prices, Oil sector, Supply

Suggested Citation

Cevik, Serhan and Saadi-Sedik, Tahsin, A Barrel of Oil or a Bottle of Wine: How do Global Growth Dynamics Affect Commodity Prices? (January 2011). Available at SSRN: https://ssrn.com/abstract=1751411 or http://dx.doi.org/10.2139/ssrn.1751411

Serhan Cevik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Tahsin Saadi-Sedik

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
149
Abstract Views
885
rank
249,496
PlumX Metrics