Country-level effects of global commodity price determinants: evidence from 72 countries

A growing literature demonstrates the impact of commodity terms of trade (CTOT) on GDP growth, child mortality rates, public debt and exchange rates in developing countries. Despite its importance, little is known about the determinants of CTOT. Using data from 72 countries over 1962-2010, we examine the short and long-run effect of global economic activity, OECD and emerging markets growth, the exchange rate of U.S. dollar, stock price volatility and real interest rates on CTOT growth. We demonstrate their asymmetric effect on exporters and importers, show that the exchange rate of the U.S. dollar is the only determinant with opposing effects in short and long-run due to inelastic commodity demand, and finally, that the growth of emerging market economies is the only variable to universally and consistently affect all of our subsamples (petroleum and non-petroleum importers and exporters). This latter point underscores the contemporary global importance of developing countries growth