Macroeconomic Determinants Of Non-Fuel Primary Commodity Price Movements

Abstract

This paper uses cointegration and error correction modelling techniques to examine the relationship between non-fuel commodity prices and world macroeconomic and monetary variables. The results show that fluctuations in industrial production of OECD countries, real effective exchange rate of the U.S. dollar and oil prices have significant short- and long- run impact on non-fuel commodity prices. In addition, there is evidence of highly significant positive correlation between the index of non-fuel commodity prices and crude oil price. This implies non-fuel commodity-dependent developing countries that are net importers of oil can derive little benefit from upward movements in commodity prices.