A1564
Title: Commodity price uncertainty co-movement: Does it matter for global economic growth?
Authors: Aikaterini Karadimitropoulou - University of Piraeus (Greece) [presenting]
Laurent Ferrara - SKEMA Business School (France)
Abstract: Global economic activity is surrounded by increasing uncertainties from various sources. The focus is on commodity prices, and a global commodity uncertainty factor is estimated by capturing comovement in volatilities of major agricultural, metals and energy commodity markets through a group-specific dynamic factor model. Then, by tracing out impulse response functions estimated using a small-scale structural VAR model, it is found that an increase in the common commodity price uncertainty results in a substantial and persistent drop in investment and trade for a set of emerging and advanced economies. It is also shown that a global commodity uncertainty shock is more detrimental to short- and long-term economic growth than usual financial and economic policy uncertainty shocks. Last, the methodology turns out to be an efficient way to disentangle the "good" and "bad" macroeconomic effects of oil price uncertainty. When an oil price uncertainty shock is common to all commodities, the macroeconomic effect is likely negative, similar to a global demand shock. However, when the uncertainty shock is only specific to the oil market, the short-run effect tends to be positive.
