Does the Commodity Super Cycle Matter?
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.
We would like to thank Daniel Guzman and Ken Teoh for outstanding research assistance. The information and opinions presented are entirely those of the authors, and no endorsement by the Central Bank of Chile or its board of directors is expressed or implied. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.