NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Commodity-Price Comovement and Global Economic Activity

Ron Alquist, Olivier Coibion

NBER Working Paper No. 20003
Issued in March 2014, Revised in August 2014
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

Guided by a macroeconomic model in which non-energy commodity prices are endogenously determined, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity. The model yields a factor structure for commodity prices and identification conditions through which factors have economic interpretations: one factor captures the combined contribution of shocks that affect commodity markets only through general equilibrium forces. Applied to a cross-section of commodity prices since 1968, the theoretical restrictions are consistent with the data and yield structural interpretations of the common factors in commodity prices. Commodity-related shocks have contributed modestly to global economic fluctuations.

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Document Object Identifier (DOI): 10.3386/w20003

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