What drives commodity price booms and busts?

We provide evidence on the dynamic effects of aggregate commodity demand shocks, commodity supply shocks, and storage demand or other commodity-specific demand shocks on real commodity prices. We analyze a new data set of price and production levels for 12 agricultural goods, metals, and soft commodities from 1870 to 2013. We establish that commodity demand shocks strongly dominate commodity supply shocks in driving prices over a broad set of commodities and over a long period of time. While commodity demand shocks have gained importance over time, commodity supply shocks have become less relevant. Published by Elsevier B.V.