Plunging commodity prices reignite discussion of primary product dependency

As world commodity prices plunge, who gains and who loses?

This should be a ‘favourite topic’ for determined macro students. The concept of a resource curse is well worth covering, since there are many analysis points (about how the cause of primary product dependency could lead to a variety of effects). There’s also ample scope for evaluation, examining who will be affected, by how much and to what extent it can impact on economic performance – loads of ‘it depends’ statements, in other words.

The Economist has published a handy map tool to see who are the primary product importers and exporters around the world.

The plunging oil price has sent the currencies of oil exporting economies into a dive. This is the flip side of Dutch Disease, in which demand for resources drives exchange rate movements.

Shifting terms of trade also have a big impact, especially on developing economies.