Research Seminar: Global Commodity Price Shocks and Sectoral Trade Dynamics in Lebanon

Recent geopolitical conflicts have had immediate and pronounced effects on global commodity markets. The war involving Iran has led to a surge in energy prices, while the war in Ukraine triggered a sharp increase in global wheat prices. For import-dependent economies such as Lebanon, these shocks translate into significant terms-of-trade losses, raising the cost of essential imports and tightening external constraints.

This paper examines how such price increases affect economic adjustment, focusing on their impact on trade flows. Using monthly data, I show that higher oil prices lead to a significant and persistent decline in non-oil imports, with particularly strong effects in sectors such as transportation equipment, chemicals, and plastics. Similarly, increases in global food prices reduce non-food imports, indicating that essential commodity shocks propagate across the economy. These adjustments reflect a loss of purchasing power and reduced access to a broad range of goods, highlighting the tangible economic costs of geopolitical instability.

Presenter: Mohamad Karaki is an Associate Professor of Economics at the Lebanese American University. His teaching and research focuses on macroeconomics, monetary economics, energy economics and applied time-series methods. Much of his work examines inflation, exchange-rate dynamics, monetary policy, external shocks, and economic adjustment in developing and fragile economies, with a particular interest in Lebanon and the Middle East. He also serves as Editor-in-Chief of the Review of Middle East Economics and Finance.

Moderator: Toni Čerkez

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Keywords: Trade flows, commodity prices, import dependence, local projection.