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Title page for ETD etd-10082008-232501


Type of Document Dissertation
Author Wang, Chih-Wei
URN etd-10082008-232501
Title Commodity price dynamics: evidence and theory
Degree PhD
Department Economics
Advisory Committee
Advisor Name Title
Mario J. Crucini Committee Chair
Craig M. Lewis Committee Member
Mototsugu Shintani Committee Member
Peter L. Rousseau Committee Member
Keywords
  • North-South trade
  • international real business cycles
  • stochastic dynamic general equilibrium model
  • error-correction model
  • commodity price dynamics
Date of Defense 2008-08-15
Availability unrestricted
Abstract
My dissertation studies the dynamics of primary commodity prices empirically and theoretically. In Chapter II, I provide empirical evidence on the time series behavior of commodity price movements. Employing monthly prices for 36 individual commodities, I find that the commodity price to CPI ratio is a more potent variable to forecast future commodity price inflation than the lagged commodity price inflation. With the aid of the bivariate error-correction model, I evaluate the relative importance of permanent and transitory shocks for commodity price movements and find that temporary disturbances play a dominant role in price variability.

Chapter III builds a stochastic dynamic general equilibrium model with a North-South trade structure to investigate the relative importance of supply and (derived) demand channels and the extent to which they can account for the observed volatility and persistence of commodity prices. The results show that both supply and (derived) demand shocks play important roles in price movements but demand shocks can generate larger price responses than supply shocks. The model can generate highly persistent commodity prices.

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