Commodity export dependency confers ex post shocks and ex ante uncertainty upon producing countries. What reduces growth is not the prospect of volatile world prices, but the actual realization of negative shocks.Dehn estimates the effects on growth of commodity price shocks and uncertainty within an established empirical growth model. Ex post shocks and ex ante uncertainty have been treated in the empirical literature as if they were synonymous. But they are distinct concepts and it is both theoretically and empirically inappropriate to treat them as synonymous.He shows that the interaction between policy and aid is robust to the inclusion of variables capturing commodity price movements. More important, his approach departs in three ways from earlier empirical studies of the subject:- It deals with issues of endogeneity without incurring an excessive loss of efficiency.- It defines the dependent variable to allow an assessment of the longer-term implications of temporary trade shocks.- It imposes no priors on how commodity price movements affect growth, but compares and contrasts a range of competing shock and uncertainty specifications.Dehn resolves the disagreement about the long-run effect of positive shocks on growth, finding that positive shocks have no long-run impact on growth (that windfalls from trade shocks do not translate into sustainable increases in income).He shows that negative shocks have large, highly significant, and negative effects on growth, but that commodity price uncertainty does not affect growth.This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to analyze the impact of commodity price risks on developing economies. The author may be contacted at [email protected].

The author estimates the effects on growth of commodity price shocks, and uncertainty within an established empirical growth model. Ex-post shocks, and ex-ante uncertainty have been treated in the empirical literature as if they were synonymous. But they are distinct concepts, and it is both theoretically, and empirically inappropriate to treat them as synonymous. He shows that the interaction between policy, and aid is robust to the inclusion of variables capturing commodity price movements. More important, his approach departs in three ways from earlier empirical studies of the subject: 1) It deals with issues of endogeneity, without incurring an excessive loss of efficiency. 2) It defines the dependent variable to allow an assessment of the longer-term implications of temporary trade shocks. 3) It imposes no priors on how commodity price movements affect growth, but compares and contrasts a range of competing shock, and uncertainty specifications. The author resolves the disagreement about the long-run effect of positive shocks on growth, finding that positive shocks have no long-run impact on growth (that windfalls from trade shocks do not translate into sustainable increases in income). He shows that negative shocks have large, highly significant, and negative effects on growth, but that commodity price uncertainty does not affect growth.

"The conference was organized by the three editors of this book and took place on August 15-16, 2012 in Seattle."--Preface.

We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model. Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.

The April 2012 issue of the World Economic Outlook assesses the prospects for the global economy, which has gradually strengthened after a major setback during 2011. The threat of a sharp global slowdown eased with improved activity in the United States and better policies in the euro area. Weak recovery will likely resume in the major advanced economies, and activity will remain relatively solid in most emerging and developing economies. However, recent improvements are very fragile. Policymakers must calibrate policies to support growth in the near term and must implement fundamental changes to achieve healthy growth in the medium term. Chapter 3 examines how policies directed at real estate markets can accelerate the improvement of household balance sheets and thus support otherwise anemic consumption. Chapter 4 examines how swings in commodity prices affect commodity-exporting economies, many of which have experienced a decade of good growth. With commodity prices unlikely to continue growing at the recent elevated pace, however, these economies may have to adapt their fiscal and other policies to lower potential output growth in the future.

Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.

The relationship between the price of oil and the level of economic activity is a fundamental issue in macroeconomics. There is an ongoing debate in the literature about whether positive oil price shocks cause recessions in the United States (and other oil-importing countries), and although there exists a vast empirical literature that investigates the effects of oil price shocks, there are relatively few studies that investigate the direct effects of uncertainty about oil prices on the real economy. The book uses recent advances in macroeconomics and financial economics to investigate the effects of oil price shocks and uncertainty about the price of oil on the level of economic activity.

Fluctuations of commodity prices, most notably of oil, capture considerable attention and have been tied to important economic effects. This book advances our understanding of the consequences of these fluctuations, providing both general analysis and a particular focus on the countries of the Pacific Rim.

We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see” mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.