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The low level of primary commodity prices since 1985 is examined in the context of the behavior of those prices relative to prices of manufactured goods since 1854. The Prebisch-Singer hypothesis of a secular decline in relative commodity prices is sustained, but the recent decline is shown to be well outside the realm of historical experience. Commodity and manufactures prices are found to be cointegrated, conditional on the negative trend and a number of unexplained short-term swings. The earlier finding of a Gibson paradox is explained in terms of the difference between short- and long-run relationships.

Commercial products --- Commodities --- Commodity Markets --- Commodity price fluctuations --- Commodity price indexes --- Commodity prices --- Deflation --- Economic History: Macroeconomics and Monetary Economics --- Economic sectors --- Growth and Fluctuations: General, International, or Comparative --- Industries: Manufacturing --- Industry Studies: Manufacturing: General --- Inflation --- Investment & securities --- Investments: Commodities --- Macroeconomics --- Manufacturing industries --- Manufacturing --- Price indexes --- Price Level --- Prices --- United Kingdom

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This paper investigates the relationship between the nominal exchange rate regime and the volatility of relative commodity prices. The analysis shows that the relationship depends upon both the market structure and the economic agent’s perception about future exchange rate movements. When the markets for manufactured goods are less competitive than the markets for primary commodities, the volatility of relative commodity prices rises when exchange rate uncertainty increases. If demand for manufactured goods is intertemporally dependent, even a small increase in exchange rate uncertainty can result in potentially large costs in terms of increased relative commodity price instability.

Foreign Exchange --- Macroeconomics --- Open Economy Macroeconomics --- Industrial Organization and Macroeconomics: Industrial Structure and Structural Change --- Industrial Price Indices --- International Monetary Arrangements and Institutions --- Commodity Markets --- Currency --- Foreign exchange --- Exchange rates --- Exchange rate adjustments --- Exchange rate arrangements --- Commodity price fluctuations --- Commodity prices --- Prices --- United States

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Primary commodities still account for the bulk of exports in many developing countries. However, real commodity prices have been declining almost continuously since the early 1980s and there is evidence of renewed weakness. The appropriate policy response to a terms of trade shock depends importantly on whether the shock is perceived to be temporary or permanent. Our results indicate that the recent weakness in commodity prices is mostly of a secular nature, stressing the need for commodity exporting countries to concentrate on export diversification and other structural policies. There is, however, scope for stabilization funds and the use of hedging strategies since the evidence also suggests commodity prices have become more volatile.

Agricultural commodities --- Agriculture: General --- Cement --- Ceramics --- Commercial products --- Commodities --- Commodity Markets --- Commodity price fluctuations --- Commodity prices --- Diffusion Processes --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Farm produce --- Glass --- Investment & securities --- Investments: Commodities --- Investments: Energy --- Macroeconomics --- Metals and Metal Products --- Metals --- Policy Coordination --- Policy Designs and Consistency --- Policy Objectives --- Prices --- Time-Series Models --- United States

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In this paper, we analyze how lack of credibility and transparency of monetary and fiscal policies undermines the effectiveness of macroeconomic policies to isolate the economy from commodity price fluctuations. We develop a general equilibrium model for a commodity-exporting economy where macro policies are conducted through rules. We show that the responses of output, aggregate demand, and inflation to an increase in commodity price are magnified when these rules are imperfectly credible and lack transparency. If policies are imperfectly credible, then transparency helps private agents to learn the systematic behavior of the autorities, reducing the effects of commodity prices shocks. Coherent with the model, we show cross-country evidence that monetary policy transparency and fiscal credibility reduce the incidence of export price volatility on output volatility. Also, our results indicate that having an explicit fiscal rule and an inflation targeting regime contribute to isolate the economy from terms of trade fluctuations.

Commodity control. --- International commodity control --- Commercial policy --- Cartels --- Producers' associations --- Inflation --- Macroeconomics --- Public Finance --- Monetary Policy --- Central Banks and Their Policies --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Fiscal Policies and Behavior of Economic Agents: General --- Commodity Markets --- Fiscal Policy --- Price Level --- Deflation --- Macroeconomics: Consumption --- Saving --- Wealth --- Commodity price shocks --- Fiscal policy --- Commodity price fluctuations --- Consumption --- Prices --- National accounts --- Economics --- United States

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We study the role of the bank-lending channel in propagating fluctuations in commodity prices to credit aggregates and economic activity in developing countries. We use data on more than 1,600 banks from 78 developing countries to analyze the transmission of changes in international commodity prices to domestic bank lending. Identification relies on a bankspecific time-varying measure of bank sensitivity to changes in commodity prices, based on daily data on bank stock prices. We find that a fall in commodity prices reduces bank lending, although this effect is confined to low-income countries and driven by commodity price busts. Banks with relatively lower deposits and poor asset quality transmit commodity price changes to lending more aggressively, supporting the hypothesis that the overall credit response to commodity prices works also through the credit supply channel. Our results also show that there is no significant difference in the behavior of foreign and domestic banks in the transmission process, reflecting the regional footprint of foreign banks in developing countries.

Banks and Banking --- Investments: Commodities --- Macroeconomics --- Money and Monetary Policy --- International Finance: General --- International Lending and Debt Problems --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Commodity Markets --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banking --- Monetary economics --- Investment & securities --- Commodity prices --- Bank credit --- Commodity price fluctuations --- Commodities --- Prices --- Money --- Credit --- Banks and banking --- Commercial products --- Nigeria