Book Review: "The Economics and Finance of Commodity Price Shocks"

Commodity price shocks are sudden and unexpected positive or negative changes in the price of a commodity or group of commodities (Mohammed 2021). These events generally challenge small developing economies by adversely impacting their macroeconomic stability and instigating volatile economic growth patterns. Commodity price shocks are especially relevant considering the recent volatility in the soft commodity and petroleum markets. The impact of these events is heavily felt in Barbados and broadly within the Caribbean due to the region's dependence on imports to meet its population's needs. Therefore, enhancing the modelling and forecasting capabilities of regional policymakers is expected to bolster the region's ability to respond effectively to these shocks.

Mikidadu Mohammed's book, "The Economics and Finance of Commodity Price Shocks," is an informative attempt to present an overview of commodity price shocks and their modelling techniques. The author aimed to achieve three primary objectives with this book: to provide readers with modelling techniques that enable them to assess and evaluate shocks, to evaluate the forecasting capabilities of existing modelling techniques, and to review the broad range of commodity case uses for these techniques. He successfully achieves these goals in a concise and accessible manner despite discussing a relatively complex subject area.

Mohammed commences by providing some background on the evolution of global commodity price shocks. He demonstrates how these shocks have typically occurred during periods of economic openness and global trade. Therefore, it is no surprise that the modern global economy, defined by its interdependence and heavy international trade, has seen an increase in the occurrence and intensity of these shocks. Consequently, the increased regularity of these shocks threatens to impede the growth of commodity-dependent nations. The author utilises this issue as motivation for the development of this book.