Geoeconomic Fragmentation and Commodity Markets

By Jorge A Alvarez, Mehdi Benatiya Andaloussi, Chiara Maggi, Alexandre Sollaci, Martin Stuermer, Petia Topalova

October 3, 2023

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Format: Chicago

Jorge A Alvarez, Mehdi Benatiya Andaloussi, Chiara Maggi, Alexandre Sollaci, Martin Stuermer, and Petia Topalova. Geoeconomic Fragmentation and Commodity Markets, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: 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.

Summary

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.

Subject: Agricultural commodities, Commodities, Commodity markets, Commodity price fluctuations, Financial markets, Inflation, Prices

Keywords: Agricultural commodities, Commodities, Commodity markets, Commodity price fluctuations, Commodity producer, Geoeconomic fragmentation, Global, Inflation, International trade, Net-commodity-importing country, Price change, Prices, Sanctions, Spillovers, Trade disruption, Trade fragmentation

Publication Details

Pages:

78
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/201
Stock No:

WPIEA2023201
ISBN:

9798400252426
ISSN:

1018-5941

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