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Commodity prices, the dollar and stagflation risk

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  • Boris Hofmann
  • Taejin Park
  • Albert Pierres Tejada

Abstract

Fluctuations in commodity prices and the US dollar exchange rate significantly affect the risk of stagflation. Using quarterly data from 22 commodity-importing economies for the past 30 years, we find that higher commodity prices and dollar appreciation each raise the odds of weak growth and high inflation. Stagflation risk increases by more when the two drivers rise in tandem – as seen over the past couple of years, in a departure from the historical pattern. Commodity-importing emerging market economies (EMEs) are more affected by changes in commodity prices and in the US dollar exchange rate than are their advanced economy counterparts. This reflects in particular the higher commodity consumption of EMEs and their greater exposure to swings in global financial conditions.

Suggested Citation

  • Boris Hofmann & Taejin Park & Albert Pierres Tejada, 2023. "Commodity prices, the dollar and stagflation risk," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:2303f
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    References listed on IDEAS

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    Cited by:

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    2. Roman Kopych & Viktor Shevchuk, 2023. "Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries," Commodities, MDPI, vol. 3(1), pages 1-17, December.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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