Modeling fluctuations in the global demand for commodities

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. It is widely understood that the real price of globally traded commodities is determined by the forces of demand and supply. One of the main determinants of the real price of commodities is shifts in the demand for commodities associated with unexpected fluctuations in global real economic activity. There have been numerous proposals for quantifying global real economic activity. We discuss which criteria a measure of global real activity must satisfy to be useful for modeling industrial commodity prices, we examine which of the many alternative measures in the literature are most suitable for applied work, and we explain why some popular measures are inappropriate for modeling commodity prices. Given these insights, we reexamine in detail the question of whether global real economic activity has declined since 2011 and by how much. Drawing on a range of new evidence, we show that the global commodity price boom of the 2000s appears to have been largely transitory. Our analysis has important implications for the design of structural models of commodity markets, for the analysis of the transmission of commodity price shocks to commodity-importing and exporting economies, and for commodity price forecasting. Terms of use: Documents inJEL-Codes: F440, Q110, Q310, Q410, Q430.

The effect of oil supply shocks on US economic activity: What have we learned?

“…We will return to the importance of the short‐run price elasticity of supply in Section . Second, oil‐market‐specific demand shocks are assumed to have no contemporaneous effect on real economic activity, which is consistent with Kilian and Zhou's () evidence that the real economic activity index is not driven by changes in the real price of oil.…”

“…We will return to the importance of the short-run price elasticity of supply in Section 6. Second, oil-market-specific demand shocks are assumed to have no contemporaneous effect on real economic activity, which is consistent with Kilian and Zhou's (2018) evidence that the real economic activity index is not driven by changes in the real price of oil. Kilian and Murphy (2012;hereafter KM12) use the trivariate VAR setup in Equation (1) but, instead of imposing exclusion restrictions as in K09, they attain identification via sign restrictions.…”

Using Market Expectations to Test for Speculative Bubbles in the Crude Oil Market

“…With respect to the interpretation of the fluctuations of the 2000s in the difference between actual future spot prices and their corresponding expectations, Kilian and Hicks () report large and persistent positive GDP forecast surprises in the major emerging and industrialized economies for the period June 2003 to June 2008, and large and persistent negative forecast surprises for the period July 2008 to December 2008. Similar results are obtained based on various proxies for global real economic activity (Kilian , Kilian and Zhou ). Thus, a possible explanation for those large deviations is that the unexpected component of oil price movements during this period is due to flow demand shocks.…”

Real‐time forecast combinations for the oil price

“…Tables A-5, A-6 and A-7 in the Supporting Information Appendix correspond to Table 1 using this activity measure but not the rea; the online database documentation describes the data details. See Kilian and Zhou (2018) and Kilian (2018) for discussions of various measures of activity. See Kilian and Zhou (2018) and Kilian (2018) for discussions of various measures of activity.…”