Commodity prices, the dollar and stagflation risk

Boris Hofmann, Taejin Park and Albert Pierres Tejada

BIS Quarterly Review, 2023

Abstract: Fluctuations in commodity prices and the US dollar exchange rate significantly affect the risk of stagflation. Using quarterly data from 22 commodity-importing economies for the past 30 years, we find that higher commodity prices and dollar appreciation each raise the odds of weak growth and high inflation. Stagflation risk increases by more when the two drivers rise in tandem – as seen over the past couple of years, in a departure from the historical pattern. Commodity-importing emerging market economies (EMEs) are more affected by changes in commodity prices and in the US dollar exchange rate than are their advanced economy counterparts. This reflects in particular the higher commodity consumption of EMEs and their greater exposure to swings in global financial conditions.

JEL-codes: E31 E32 F31 F36 F41 F44 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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