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

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2016-11-01

Number: 1614