End of the Supercycle and Growth of Commodity Producers: The Case of Chile

Author: Eyraud Luc

Volume/Issue: Volume 2015 Issue 242

Publication date: November 2015

ISBN: 9781513531557

$20.00

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Topics covered in this book

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Economics- Macroeconomics , WP , price , commodity , price shock , volatility model , copper price series , GDP deceleration , price volatility model , Chile , Commodities , Copper , Growth , copper price outlook , copper price Supercycle , nominal copper price , negative commodity price shock , macroeconomic effect of commodity price shock , price series , copper price fluctuation , effect of commodity price shock , Metal prices , Commodity prices , Commodity price shocks , Global

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Summary

This paper estimates the effect of copper prices on Chile’s growth at various time horizons. We find that a price decline is likely to have a durable (although not permanent) effect on GDP growth: while the impact is the strongest in the first 3 years after the shock, the transition towards the new lower steady-state GDP level generally takes 5–10 years. From a production function perspective, the GDP growth slowdown is mainly driven by lower capital accumulation.