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More on the energy / non-energy commodity price link
 
Author:Baffes, John; Collection Title:Policy Research working paper ; no. WPS 4982
Country:World; Date Stored:2009/06/30
Document Date:2009/06/01Document Type:Policy Research Working Paper
SubTopics:Energy Production and Transportation; Markets and Market Access; Emerging Markets; Commodities; E-BusinessLanguage:English
Rel. Proj ID:1W-Commodity Analysis, Monitoring And Price Forecasting -- -- P061922;Region:The World Region
Report Number:WPS4982Sub Sectors:(Historic)Economic management
Volume No:1 of 1  

Summary: This paper examines the energy/non-energy commodity price link, based on a reduced form econometric model and using annual data from 1960 to 2008. The transmission elasticity from energy to the non-energy index is estimated at 0.28. At a more disaggregated level, the fertilizer index exhibited the largest elasticity (0.55), followed by precious metals (0.46), food (0.27), metals and minerals (0.25), and raw materials (0.11). By contrast, only a few price indices responded strongly to inflation, although the trend parameter estimate (often viewed as a proxy for technological progress) is negative for agriculture and positive for metals. A key implication of the pass-through results is that for as long as energy prices remain elevated, most non-energy commodity prices are expected to be high.

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