Economic growth in China and its impact on international commodity prices

Abstract

Since the turn of the century, China has experienced economic growth that has called for rapid industrialisation, infrastructure growth and urbanisation, making China highly dependent on primary commodities. The resource intensive growth path followed by a slowdown in recent years has raised the question to what extent her demand for commodities can affect international commodity prices. To this end, recent studies have analysed the link between economic growth or slowdown on commodity prices using linear multivariate models. However, a problem is that commodity prices are known to be highly variable and characterised by multiple structural changes. With such characteristics of the data, it is likely to be the case one may obtain mis‐specified inferences from a linear multivariate framework. Accordingly, we make use of novel Flexible Fourier Form (FFF) econometric procedures to account for multiple breaks in the economic variables, which have better power and size properties over the standard linear models. We find that the persistence of economic variables employed in this study and their causal link are better approximated by such nonlinear FFF procedures. Our results show that there is evidence of short run predictability between selected commodity prices and economic growth in China. Further, the responses of different commodity prices to shocks in economic growth are quite profound especially for those cases where we find causal links with economic growth in China. While we find a significant impact of economic growth of China on commodity prices, the response varies for different commodities.

Discerning trends in international metal prices in the presence of non-stationary volatility

“…This reversion to equilibrium could be persistent in the face of large increases in demand and being unable to meet this demand by increasing supply, as has been the case in response to the most recent metal price boom in the mid-2000s, largely driven by China and India (Dobbs et al 2013). However, since the slowdown in China, metal prices have recorded decreases (Ghoshray and Pundit 2020).…”

Forecasting Selected Commodities’ Prices with the Bayesian Symbolic Regression

“…Due to the existence of seasonal patterns, 12-month differences were taken. Furthermore, the share of BRIC (Brazil, Russia, India, and China) countries' trade in the total global trade was computed (United Nations Statistics Division 2022), as these countries are important players on commodities markets (Ghoshray and Pundit 2021). Similarly, 12-month differences were taken.…”

The Co-Movement Between Commodity Prices and the Economic Growth of Malaysia

“…Despite the importance of assessing the relationship between commodity prices and economic growth (Collier & Goderis, 2012;Ghoshray & Pundit, 2021) as well as the growing role of assessing such topics through wavelet analysis in economics (Connor & Rossiter, 2005), the obvious shortcoming of previous studies is that there is scarce research attempted in investigating the relationship between the variables in the context of Malaysia despite the sizeable economic scale of its commodities, as shown in Table 1 and 2. Many of the attempts conducted in the country focused on the impact of commodity prices on the stock market (Nordin et al, 2014), the exchange rate (Ramakrishnan et al, 2017), and inflation (Chuah et al, 2013).…”

“…Other studies are paying attention to the short-term relations, with Tiwari et al (2016) claiming that the co-movements between economic growth and commodity prices became weaker in the short run when controlling certain economic factors. Similar to the long run, the relationship between commodity prices and economic growth is also found to be heterogeneous in the short run across various commodities, as demonstrated by Ghoshray & Pundit (2021). Cavalcanti et al (2014) postulated that the impact of commodities on growth varies across cross-section units and depends on country-specific factors, macroeconomic fundamentals, and institutions.…”

“…As displayed, prices are precarious throughout Etikonomi Volume 23 (1), 2024: 11 -26 time, as described by Chaudhuri (2001) and Jacks et al (2011), with the lowest point exhibited during the peak of the COVID-19 pandemic, while the highest level was in the year 2022, as the world markets are recovering. The movement of commodity prices depends on various factors, including changes in demand factors and the real interest rate (Arango et al, 2012;Arbatli & Vasishtha, 2012), the exchange rate (Ghoshray & Pundit, 2021), consumption growth (Cheung & Morin, 2007), sociopolitical issues (Jiang et al, 2022), and competitiveness (Wright & Williams, 1982;Prasetyani et al, 2020). The substantial dependence of the country's economy on commodity exports (Bank Negara Malaysia, 2013;Department of Statistics Malaysia, 2021) and the inherent volatility in commodity prices raises an essential question: Is there a significant relationship between commodity prices and Malaysia's economic growth?…”