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Central Bankers Need to Take Note of Transition to Clean Energy
The path from traditional energy sources to alternative sources with lower greenhouse gas emissions—including renewable energy, and carbon capture and storage—is long and paved with abundant uncertainty.
Oil and Gas Sector Increasingly Influences U.S. Business Fixed Investment
As U.S. oil production has more than doubled over the past decade, the oil and gas sector has become more important to growth in non-residential investment.
Working Paper
Industrialization and the demand for mineral commodities
This paper uses a new data set extending back to 1840 to investigate how industrialization affects the derived demand for mineral commodities. I establish that there is substantial heterogeneity in the long-run effect of manufacturing output on demand across five commodities after controlling for sectoral change, substitution and technological development. My results imply substantial differences across commodities with regard to future demand from industrializing countries and with regard to the effect of demand shocks on prices. Models should include non-Gormand preferences to account for ...
Working Paper
150 years of boom and bust: what drives mineral commodity prices?
My paper provides long-run evidence on the dynamic effects of supply and demand shocks on mineral commodity prices. I assemble and analyze a new data set of price and production levels of copper, lead, tin, and zinc from 1840 to 2010. Price fluctuations are primarily driven by demand rather than supply shocks. Demand shocks affect the price persistently for up to five-teen years, whereas the effect of mineral supply shocks persists for a maximum of five years. My paper shows that price surges caused by rapid industrialization are a recurrent phenomenon throughout history. Mineral commodity ...
Working Paper
Non-renewable resources, extraction technology, and endogenous growth
We document that global resource extraction has strongly increased with economic growth, while prices have exhibited stable trends for almost all major non-renewable resources from 1700 to 2018. Why have resources not become scarcer as suggested by standard economic theory? We develop a theory of extraction technology, geology and growth grounded in stylized facts. Rising resource demand incentivises firms to invest in new technology to increase their economically extractable reserves. Prices remain constant because increasing returns from the geological distribution of resources offset ...
Journal Article
Demand Shocks Fuel Commodity Price Booms and Busts
Demand shocks due to rapid industrialization have driven commodity price booms throughout history. As periods of industrialization lose steam and supply catches up, busts follow after about 10 years. A new dataset of price and production levels of 12 commodities provides evidence of this behavior from 1870 to 2013.
A Tale of Boom and Bust: What Drives Dry Bulk Freight Rates?
As events in the past year have amply demonstrated, volatility in shipping markets is very much back after a period of relative tranquility. Thus, the Baltic Exchange Dry Index, a measure of shipping costs, nearly quadrupled from January to June 2020 as the shocks of COVID-19 first ravaged, then propelled international trade in bulk commodities. Even one-time events, such as the Suez Canal blockage in late March 2021, suddenly roiled global shipping markets.
Working Paper
What drives commodity price booms and busts?
What drives commodity price booms and busts? We provide evidence on the dynamic effects of commodity demand shocks, commodity supply shocks, and inventory demand shocks on real commodity prices. In particular, we analyze a new data set of price and production levels for 12 agricultural, metal, and soft commodities from 1870 to 2013. We identify differences in the type of shock driving prices of the various types of commodities and relate these differences to commodity types which reflect differences in long-run elasticities of supply and demand. Our results show that demand shocks strongly ...
Solving a Puzzle: More Nonrenewable Resources Without Higher Prices
Economic intuition suggests nonrenewable resources such as metals or fossil fuels become scarcer and more expensive over time. However, a new dataset covering the years 1700 to 2018 indicates otherwise.
Journal Article
OPEC likely to keep pumping despite budget woes of some members
Low oil prices are hurting OPEC countries? budgets. However, differences in their ability to cope with depressed prices have increased the likelihood that the cartel will keep on pumping, creating further downside risks to prices and Texas oil producers.