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Geoeconomic Fragmentation and Commodity Markets
Author:
Mr. Jorge A Alvarez https://isni.org/isni/0000000404811396 International Monetary Fund

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,
Mehdi Benatiya Andaloussi
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Chiara Maggi https://isni.org/isni/0000000404811396 International Monetary Fund

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Alexandre Sollaci https://isni.org/isni/0000000404811396 International Monetary Fund

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Martin Stuermer
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Petia Topalova https://isni.org/isni/0000000404811396 International Monetary Fund

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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 201
Language:
English
Publication Date:
03 Oct 2023
DOI:
https://doi.org/10.5089/9798400252426.001
ISBN:
9798400252426
ISSN:
1018-5941
Pages:
78
Keywords:
Commodities; international trade; sanctions; spillovers; prices; geoeconomic fragmentation; trade disruption; price change; commodity producer; net-commodity-importing country; trade fragmentation; Commodity markets; Commodity price fluctuations; Agricultural commodities; Inflation; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the economic impact of fragmentation of commodity trade. We assemble a novel dataset of production and bilateral trade flows of the 48 most important energy, mineral and agricultural commodities. We develop a partial equilibrium framework to assess which commodity markets are most vulnerable in the event of trade disruptions and the economic risks that they pose. We find that commodity trade fragmentation – which has accelerated since Russia’s invasion of Ukraine – could cause large price changes and price volatility for many commodities. Mineral markets critical for the clean energy transition and selected agricultural commodity markets appear among the most vulnerable in the hypothetical segmentation of the world into two geopolitical blocs examined in the paper. Trade disruptions result in heterogeneous impacts on economic surplus across countries. However, due to offsetting effects across commodity producing and consuming countries, surplus losses appear modest at the global level.
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IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund