What drives commodity price booms and busts?

Jacks, David S.; Stuermer, Martin

doi:10.24149/wp1614

Working Paper

What drives commodity price booms and busts?

Abstract: What drives commodity price booms and busts? We provide evidence on the dynamic effects of commodity demand shocks, commodity supply shocks, and inventory demand shocks on real commodity prices. In particular, we analyze a new data set of price and production levels for 12 agricultural, metal, and soft commodities from 1870 to 2013. We identify differences in the type of shock driving prices of the various types of commodities and relate these differences to commodity types which reflect differences in long-run elasticities of supply and demand. Our results show that demand shocks strongly dominate supply shocks.

Keywords: Commodity prices; natural resources; structural VAR;

JEL Classification: E30; N50; Q31; Q33;

https://doi.org/10.24149/wp1614