Commodity Price Booms and Busts: A Primer

New David Jacks WP:  This paper considers the evidence on real commodity prices over 160 years for 28 commodities representing 5.03 trillion USD worth of production in 2007. In so doing, it suggests and documents a complete typology of commodity price series, comprising long-run trends, medium-run cycles, and short-run boom and bust episodes. The findings of the paper can be summarized as follows: real commodity prices have been on the rise from at least 1950 if evaluated on the basis of the value of production; there is a consistent pattern of commodity price super-cycles in the historical record as well as the present which entail decades-long positive deviations from these long-run trends; these commodity price super-cycles are punctuated by booms and busts which are historically pervasive and becoming more exacerbated over time. These last elements of boom and bust are also found to be particularly bearing in determining real commodity price volatility as well as potentially bearing in determining trend growth in commodity dependent economies.