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The Power of Prices: How Fast Do Commodity Markets Adjust to Shocks?

Author

Listed:
  • Mr. Christian Bogmans
  • Mr. Andrea Pescatori
  • Ivan Petrella
  • Ervin Prifti
  • Martin Stuermer

Abstract

This paper establishes supply and demand elasticities for a broad set of commodities based on a consistent dataset and identification methodology. We apply granular IV methods to a new cross-country panel dataset of commodity production and consumption from 1960-2021. The results indicate that commodity demand and supply are typically price inelastic. Demand and supply tend to be the most inelastic for minerals, whereas they are most elastic for agricultural commodities. The elasticities of energy commodities fall somewhere in between. Supply and demand become more elastic at longer time horizons for mineral and energy commodities, but not for most agricultural commodities.

Suggested Citation

  • Mr. Christian Bogmans & Mr. Andrea Pescatori & Ivan Petrella & Ervin Prifti & Martin Stuermer, 2024. "The Power of Prices: How Fast Do Commodity Markets Adjust to Shocks?," IMF Working Papers 2024/077, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/077
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    Keywords

    Commodities; international trade; price elasticities; demand; supply; energy; agriculture; minerals; metals.;
    All these keywords.

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