# Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries

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## Abstract

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## 1. Introduction

## 2. Analytical Framework

## 3. Data and Statistical Model

_{t}is the real gross domestic product (2010 = 100); cpi

_{t}is the consumer price level (2010 = 100); neer

_{t}is the nominal effective exchange rate (NEER) (2010 = 100). Consumer price indexes are index numbers that measure average changes in the prices of goods and services over a given quarter. The NEER is defined as domestic currency units per unit of foreign currencies, so that an increase in the value of e

_{t}represents a depreciation for the home country. Among country-specific controls, several extra variables are used: usrate

_{t}, the U.S. interest rate (%); invest

_{t}, investments (% of GDP); open

_{t}, openness to foreign trade (% of GDP).

_{t}

_{−1}represents the state transition between the time periods t − 1 and t; ${\mathrm{x}}_{t}$ is the vector of observed variables with time-varying coefficients (${\mathrm{x}}_{t}\in [{p}_{t}^{agro}$, ${p}_{t}^{metal}$, ${p}_{t}^{oil},{neer}_{t}]$); Γ

_{t}is the matrix of coefficients for observed variables; ${\mathrm{\omega}}_{t}$ is a white noise error vector; and ${\mathrm{W}}_{t}$ is the covariance matrix of innovations. Equation (3) describes the dynamics of the system.

_{t}) are modeled as driftless random walks, which can capture various time paths of the parameters. On the other hand, time-varying coefficients for the lagged value of output growth rate ($\Delta $y

_{t}) and all predetermined variables are modeled as recursive ones, which implies the relative stability of the relationships. Priors are obtained on the basis of the regression estimates for the 2000–2010 period. Moreover, the estimation started at the observation of 1998Q1, i.e., four years before the estimates are used, so that the estimates have time to converge, regardless of the influence of the priors. The EViews 10 statistical package was used for estimations.

## 4. Results

#### 4.1. Commodity Price Effects on Inflation

#### 4.2. Commodity Price Effects on Output

#### 4.3. Other Results

## 5. Methods

## 6. Discussion

## 7. Conclusions

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Conflicts of Interest

## References

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**Figure 1.**The world commodity prices (index, 2000 = 100), 2000–2022. Source: International Monetary Fund.

**Figure 2.**Inflationary effects of crude oil prices. Note: here and hereafter point estimates are presented within the band of ±2 standard deviations.

Country | Energy | Metals | Agricultural Goods | |||
---|---|---|---|---|---|---|

Imports | Exports | Imports | Exports | Imports | Exports | |

Czechia | 9.4 | 3.5 | 6.4 | 7.2 | 0.7 | 1.0 |

Hungary | 15.0 | 4.3 | 5.7 | 4.8 | 2.5 | 3.4 |

Poland | 10.0 | 4.0 | 7.6 | 6.6 | 4.2 | 6.8 |

Romania | 12.0 | 7.6 | 8.3 | 5.8 | 5.2 | 10.6 |

Bulgaria | 12.3 | 5.4 | 7.1 | 6.1 | 6.5 | 11.9 |

Croatia | 25.0 | 19.0 | 7.7 | 5.6 | 5.6 | 7.3 |

Slovakia | 14.0 | 5.2 | 8.4 | 10.1 | 2.6 | 2.5 |

Slovenia | 13.0 | 7.9 | 9.8 | 8.8 | 3.3 | 1.3 |

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**MDPI and ACS Style**

Kopych, R.; Shevchuk, V.
Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries. *Commodities* **2024**, *3*, 19-35.
https://doi.org/10.3390/commodities3010002

**AMA Style**

Kopych R, Shevchuk V.
Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries. *Commodities*. 2024; 3(1):19-35.
https://doi.org/10.3390/commodities3010002

**Chicago/Turabian Style**

Kopych, Roman, and Viktor Shevchuk.
2024. "Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries" *Commodities* 3, no. 1: 19-35.
https://doi.org/10.3390/commodities3010002