Commodity Price Supercycles: What Are They and What Lies Ahead?
Commodity Price Supercycles: What Are They and What Lies Ahead?
Bahattin Büyükşahin, Kun Mo and Konrad Zmitrowicz, International Economic Analysis Department
- Commodity prices tend to go through extended periods of boom and bust, known as supercycles. In general, commodity price movements are important for Canada because they help determine the country’s terms of trade, exchange rate, employment, income and inflation.
- Bank of Canada research shows that there have been four broad-based commodity price supercycles since the early 1900s. The current supercycle started in the mid-1990s and is now in its downswing phase.
- One potential driver of these supercycles is the interaction of large, un – expected demand shocks and slow-moving supply responses. This interaction is widely accepted as the source of the current supercycle, which was driven by rapid growth in China and other emerging-market economies.