Fiscal Policy, the Real Exchange Rate, and Commodity Prices

The Macroeconomic Determinants of Commodity Prices

“…As noted by Reinhart and Wickham (1994) and World Bank (1994). technological developments have played a key role in boosting output of primary commodities.…”

The Macroeconomic Determinants of Commodity Prices

“…To elude nonstationarity problems (see Reinhart and Wickham (1994) for a fuller discussion of the time-series properties of commodity prices), we avoid employing levels (or log levels) in the econometric analysisY The seasonality patterns evident in some of the regressors and instruments are dealt with by using four-quarter differences (rather than first differences) of all the variables. This filter has the advantage of simultaneously eliminating the stationarity problems as well as the seasonality issues.…”

“…s Although market conditions vary from one commodity to another. Reinhart and Wickham (1994) show that the downward trend has been quite generalized and is evident in the major commodity groupings, such as the index for all commodities and the beverages. food, and metals indices.…”

“…First, as noted in Reinhart and Wickham (1994), the "unobserved process" of technological change appears to have had an important impact in increasing world commodity supply (particularly of agricultural commodities in developing countries). This impact is only imperfectly captured in our measure of supply, which focuses on industrial country imports of primary commodities.…”

“…The real exchange rate of the U.S. dollar explains a fairly stable proportion of the variance of commodity prices throughout the sample subperiods. lJ For a discussion of the volatility of commodity prices, see Reinhart and Wickham (1994).…”