Primary commodity prices and the OECD economic performance

The relationship linking primary commodity prices to the OECD economic performance is analyzed by explicitly accounting for the presence of a two-way causality. The macroeconomic model is built on a relatively small number of equations which represent the interplay of five markets: primary commodity-, financial-, OECD labour-, OECD and LDC product market. The difference between primary commodity- and manufactured good price formation is emphasized. Quantitative results are provided on the basis of historical estimations and dynamic simulations.