Asian Drivers, Commodities and the Terms of Trade

Abstract

Notwithstanding characteristic volatility and variance between individual commodities, it is clear that after 2002 (and before the last quarter of 2008) commodity prices rose beyond their historic trend (Figure 6.1). This is, of course, not the first time that there have been spikes in commodity prices. However, the duration of the current price surge has already exceeded that of previous rises in commodity prices in the 1950s and 1970s. I will argue that there are persuasive reasons to believe that they will be sustained in the near and medium term, if not the long term, notwithstanding the sharp and very rapid fall across the board in commodity prices in late 2008.