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© 2023 International Monetary Fund
WP/23/201
IMF Working Paper
Research Department
Geoeconomic Fragmentation and Commodity Markets
Prepared by Jorge Alvarez, Mehdi Benatiya Andaloussi, Chiara Maggi, Alexandre Sollaci, Martin Stuermer and Petia Topalova1
Authorized for distribution by Daniel Leigh
October 2023
IMF Working Papers describe research in progress by the authors and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: 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.
| JEL Classification Numbers: | F11, F12, F14, F15, F17, F41, F42, F43, Q17, Q27, Q37, Q43. |
| Keywords: | Commodities; international trade; sanctions; spillovers; prices; geoeconomic fragmentation. |
| Authors’ E-Mail Addresses: | jalvarez@imf.org, mbenatiyaandaloussi@imf.org, cmaggi@imf.org, abalduinosollaci@imf.org, mstuermer@imf.org, ptopalova@imf.org. |
| JEL Classification Numbers: | F11, F12, F14, F15, F17, F41, F42, F43, Q17, Q27, Q37, Q43. |
| Keywords: | Commodities; international trade; sanctions; spillovers; prices; geoeconomic fragmentation. |
| Authors’ E-Mail Addresses: | jalvarez@imf.org, mbenatiyaandaloussi@imf.org, cmaggi@imf.org, abalduinosollaci@imf.org, mstuermer@imf.org, ptopalova@imf.org. |
We are grateful to Marijn Bolhuis, Jiaqian Chen, Thibault Fally, Pierre-Olivier Gourinchas, Oleg Itskhoki, Benjamin Kett, Petya Koeva Brooks, Daniel Leigh, Andrei Levchenko, Julien Martin, Andrea Pescatori, Andrea Presbitero, James Sayre, David Shin, and John Sturm for comments and suggestions. We thank Thibault Fally and James Sayre as well as Marijn Bolhuis, Jiaqian Chen and Benjamin Kett for sharing data and related code with us. We are grateful to Naomi Idoine and her colleagues from the British Geological Survey for guidance on data. Yarou Xu and Canran Zheng provided excellent research assistance. The views in this paper are those of the authors and do not reflect the views of the International Monetary Fund, its Executive Board, or its Management.