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International Monetary Fund. Western Hemisphere Dept.


Global activity has slowed, and the expansion has become more uneven with increasing downside risks, accompanied by bouts of global financial market volatility. Although the transient factors that contributed to the slowdown in the first half of the year will dissipate, the loss of confidence associated with perceived policy paralysis in many advanced economies along with deepening balance sheet fragilities will hold back growth going forward. These factors have already unnerved markets in recent weeks. Growth in emerging economies has thus far been somewhat more resilient, though there are increasing signs of moderation as global financial conditions have deteriorated.


The depressed condition of non-oil primary commodity markets during 1981–82 was the worst since World War II. The overall index of annual average prices of primary commodities (other than gold and petroleum) declined by 12 percent in 1982 (in dollar terms), following a 15 percent decline in 1981. The cumulative two-year decline of 25 percent was the largest and longest in more than three decades. During the last three decades, the largest annual decline occurred during the 1975 recession, when primary commodity prices fell by 19 percent; thereafter, they quickly recovered, increasing by 15 percent in 1976 and by 21 percent more in 1977. Commodity prices in real terms, estimated by deflating nominal prices by the United Nations price index of manufactured exports of developed countries, fell by 20 percent in 1981–82 to a postwar low. Commodity prices increased by 6 percent in 1983, but the aggregate index in 1983 was 20 percent below the previous peak attained in 1980 and 6 percent below the average index for 1977–83.


The occurrence of a recession-like decline in commodity prices in 1984–86 during the upswing of the business cycle has raised concerns about the nature and causes of the decline—in particular, whether the causes may be related more to long-term structural factors than to short-term, reversible factors. For example, it has been recently stated that “the primary-products economy has come ‘uncoupled’ from the industrial economy” (Drucker (1986)) and that “economic growth is no longer accompanied by increased consumption of basic materials” (Larson, Ross, and Williams (1986)). The purpose of this paper is to provide an analysis of the causes of the recent decline in commodity prices in order to develop a better understanding of its underlying nature.

International Monetary Fund. Western Hemisphere Dept.


Growth during the first half of 2011 was robust, supported by easy external financing, favorable terms of trade for commodity exporters, and lingering effects of past accommodative policies. However, the shift in the global economic environment and bouts of market volatility pose major challenges for policymakers. Although the slowdown in advanced economies is projected to have a moderate effect on growth in most countries, large downside risks to the outlook loom. In this context, policymakers should remain vigilant to overheating, and rebuild policy buffers used during the global crisis, since a rapid shift in global sentiment may require more supportive policies. In a downside scenario, monetary policy should be the first line of defense for countries with credible frameworks, while fiscal easing should be utilized only if severe downside risks materialize. Prospects are weaker in countries with closer links with advanced economies and limited policy space.

International Monetary Fund. Western Hemisphere Dept.


As a net commodity-exporting region, Latin America—and especially South America—has significantly benefited from the commodity price boom of recent years. At the current juncture, however, uncertain global economic prospects have raised questions about its vulnerability to a sharp fall in commodity prices and the policies that can shield it from such a shock. This chapter examines the region’s commodity dependence and the history of commodity price busts in the last four decades to address these questions. Despite shifting trade structures in some countries, Latin America is—on average—as reliant on commodities today as 40 years ago. With commodities responding sensitively to global output fluctuations, the region is particularly vulnerable to a global economic slowdown. However, we find evidence that policies in the run-up of sharp terms of trade drops—especially when those are preceded by booms—play an important role in shaping the economic impact. Limited exchange rate flexibility, a weak external position, and loose fiscal policy tend to amplify the negative effects of these shocks on domestic output. Financial dollarization also appears to act as a shock “amplifier.” With improved fundamentals in many of these dimensions, the region appears to be better placed to withstand a turnaround in commodity prices today than in the past.

International Monetary Fund. External Relations Dept.

Growth in sub-Saharan Africa (SSA) is expected to hit 6.7 percent in 2008, up from 6 percent in the current year (see table). According to the IMF’s latest Regional Economic Outlook (REO), SSA is experiencing its strongest growth and lowest inflation in more than 30 years.

International Monetary Fund

This study relates Australian household saving more closely to movements in asset market using event study analysis and econometric analysis. In this study, the policy challenges for Australia from rebalancing in China, a temporary growth slowdown in China, and a recession in advanced countries are analyzed. The Globally Integrated Monetary and Fiscal Model (GIMF) is used for policy challenges. The impact of the mining boom on the Australian labor market is also discussed in this paper.