Commodity Prices and U.S. International Trade

Abstract

This paper analyzes the interactions between commodity markets and U.S. international trade from January 1995 to March 2021, by extending the model by Kilian et al. (2022) with the introduction of a commodity factor. The commodity factor is calculated through a genetic algorithm which allows to select the combination of commodity prices that best explain North American Container Trade. Our main results show that an increase in the volume of trade leads to a positive and permanent on commodity prices, while a shock in commodity prices has a transitory positive effect on container trade. Furthermore, this paper suggests that there has been a significant and permanent structural break in the way commodity prices relate to container trade volumes. For example, while prior to the Great Financial Crisis, agricultural products were of high relevance in that relationship, this is now dominated by the energy commodities.

This paper analyzes the interactions between commodity markets and U.S. international trade from January 1995 to March 2021, by extending the model by Kilian et al. (2022) with the introduction of a commodity factor. The commodity factor is calculated through a genetic algorithm which allows to select the combination of commodity prices that best explain North American Container Trade. Our main results show that an increase in the volume of trade leads to a positive and permanent on commodity prices, while a shock in commodity prices has a transitory positive effect on container trade. Furthermore, this paper suggests that there has been a significant and permanent structural break in the way commodity prices relate to container trade volumes. For example, while prior to the Great Financial Crisis, agricultural products were of high relevance in that relationship, this is now dominated by the energy commodities.